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Home / Business Contracts / System Integration Agreement

What is system integration agreement?

System integration agreement is an agreement where an IT purchaser buys an entire IT solution from an IT system seller as a package instead of purchasing individual components such as software.

Then the IT system supplier has to make this new system work (and integrate with) the business owners other current systems.

For example we worked on a very large IT Systems integration contract where Australia’s air traffic control provider (Airservices Australia) was obtaining a new air traffic management system from Thales. In this case Thales had to build and deliver a working system and integrate it so that it works in Airservices’ environment.

So with a Systems Integration Agreement, an entire computer system is integrated with the purchaser’s business so it is more convenient compared to buying individual parts separately.

The IT system the purchaser buys includes components such as:

  • Hardware;
  • Software;
  • Licence of IP Rights;
  • Support and maintenance services;
  • Acceptance testing;
  • Training the purchaser’s staff about how to use the IT system.

The agreement may be a turnkey agreement which is the name given to a type of agreement where the purchaser just ‘turns a key’ (like starting a car) to start the operations of the IT system.

When do I need a system integration agreement?

1. It brings clarity

This agreement clearly defines rights and obligations of both parties and services involved.

2. System Integration agreement simplifies your data management operations

If you buy your IT system as a package, it will be easier to manage your data and run your business operations.

For example, your business may store different kinds of data such as sales data, employee data and budgeting data. If you buy all your database software separately for these data types, it will be harder to access to all these data from one computer and by one method.

However, an integrated IT system will help you streamline managing your data management.

3. It increases the productivity of your employees

Having an integrated IT system make it easier to automate tasks in the workplace.

Thanks to IT integration, your employees will enter less data manually so that they can focus on more productive aspects of their work.

4. Increased sales

An integrated IT system means that all data form all your different departments are in one system so the data will be more accurate. More accurate data means that your customers will easily access to the most recent and accurate data so they are more likely to make a purchase.

For example, if you are running an online store and your shipment date information and availability of the product customer wants should be accurate and present. Otherwise you may lose your customer.

If all data is in a one IT system, it will be more accurate and the customer will be more likely to place an order.

5. It will help you make better decisions

Having an integrated IT system allows you to collect all your data in one database and analyze it. By analyzing all your data, you can determine at what time during a day your sales increase or which customer calls go unresolved at first try.

What sort of clauses should be in a system integration agreement?

Scope of integration: You should avoid vague definitions and specifically describe the IT system that the seller will provide to you. What should be the standard for servers or database management system? Does the seller also have to provide maintenance and support services? If so, what will be the amount of payment?

Acceptance tests: Even if you purchased your whole IT system as one package, you may still have doubts if it will work properly.
Your contract should build in a robust acceptance testing process so that you can test the system before it goes live to ensure that it works and that in integrates or works you’re your current (and other) business systems.

Acceptance certificate: It is common practice that the purchaser signs an acceptance certificate to confirm that the IT system runs properly. Once you accept the IT system, you lose your right to reject it.

Intellectual Property Rights: A software program within an IT system will usually be protected by copyright. When you start to use the IT system, IP right owners may sue you for infringement on their rights on software. Against this risk, you can impose a due diligence obligation on your IT system vendor and hold it responsible for any legal dispute.

Ownership: You can regulate in your contract if you have any ownership rights in the software components.

Sub-licencing: Can you license the IT system to a third party or your affiliate companies? It may be a good option to include a provision for this.

Confidentiality: The contract may require seller to install the IT system on your premises. If this is the case, the seller will have access to your databases and servers and may find out about trade secrets or personal data. It is safer to put a confidentiality obligation on seller.

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