E-Commerce Checklist; Emerging Issues for Companies in E-Business

E-Commerce Checklist
Emerging Issues for Companies in E-Business

1. Outsourcing: ASP Business and Legal Issues.

Application Service Providers (ASPs) combine hosting and access to application software into a single service. Companies access hardware and software maintained by an off-site provider. ASPs are an attractive choice for a variety of companies, large and small, that want an option to traditional software licenses and hardware purchases. Start up companies can avoid large expenditures for hardware and software and existing companies avoid expenditures for upgrades and the cost of maintaining an IT staff. Companies which seek rapid entry or rapid growth in e-commerce are able to access quickly necessary hardware and software. Before entering into an ASP service level agreement (typically 3 - 5 years) business and legal issues should be negotiated and agreed to in writing, including, at the very least, written agreements regarding the following:

Pricing Model. Choice of charge per use, monthly service charge or percent of revenue.
System Requirements. Define minimum functional service level requirements. Are there penalties or termination rights if requirements are not satisfied?
Other Software. Define what software is currently offered by the ASP and what other software will be available during the contract term.
Exit Strategy. Can software be moved in-house? Can data be converted to another system? What penalties will be charged for early termination?
Termination. What termination rights do the parties have if either is acquired?
References. Remember to check references and the background of ASP service partners.

2. Use of RFPs to Avoid Problems and Expense.

Companies can avoid the expense of contract negotiations and possible litigation by using Requests for Proposals (RFPs) in software licensing, website development agreements, ASP service level agreements and hardware acquisitions. Important provisions include:

Detailed functionality requirements.
System acceptance and warranty standards.
Remedies in case a system does not perform, including return of amounts paid, conversion costs, replacement costs.

3. ASP Outsourcing and Insurance Provisions.

General liability policies do not adequately protect companies which engage in e-business. Power outages, hacker attacks, credit card theft, business interruption and intellectual property infringement all present risks which need to be addressed by both risk prevention and insurance. ASP service level agreements should specify:

Amounts and type of insurance - E-Business interruption, errors & omissions, multi media, and internet liability.
“Best practices” to avoid risk.

4. Privacy Part One: Your Website - Avoiding Consumer Complaints and the FTC.

Website privacy is an important issue for consumer groups and the Federal Trade Commission. The key to avoiding problems is understanding your liability.

Adopt a privacy policy and follow it. Most FTC actions result from website operators failing to follow their privacy policies. Policies should describe what information is collected and how it is used. Privacy policies should be carefully drafted, reviewed regularly and updated to conform with actual practices of the company.
Comply with federal regulations. The use of consumer financial information and information regarding children under 13 is regulated by the federal government - especially provisions relating to notice on web sites.
Stay informed. Internet privacy concerns are affecting off-line businesses such as direct mail. Under proposed laws, consumers may be able to prohibit a business that collects data to market back to its consumers or sell the data as customer lists to unrelated third parties.

5. Privacy Part Two: Monitoring Employee E-mail.

Employers should adopt and follow an electronic communications policy. It is an important step in avoiding hostile work environment lawsuits. An important component of any policy is to state that employees should have no expectation that any information transmitted over company facilities or stored or company-owned computers is or will remain private. Policies should specifically prohibit defamatory, discriminatory or obscene material or material that infringes upon another's intellectual property rights (e.g., copyrights).

This Article is published for general information, not to provide specific legal advice. The application of any matter discussed in this article to anyone's particular situation requires knowledge and analysis of the specific facts involved.

Copyright © 2000, Fairfield and Woods, P.C.,
ALL RIGHTS RESERVED.

Comments or inquiries may be directed to:
John A. Leonard.