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When the Ontario government convened a task force last year to investigate its many information technology (IT) project failures, it called on several public sector officials, vendors and consultants, but only one lawyer. That lawyer, Duncan Card, soon realized he was dealing with an organization in dire need of expert counsel.

"The Ontario government really conducts itself like a medium-sized business," says Mr. Card, a partner with Toronto-based Bennett Jones LLP and author of Information Technology Transactions: Business, Management & Legal Strategies, a book on IT contracting.

"They learned the hard way to get specialized lawyers if they don't have that [expertise] internally. You didn't have to convince any of the large banks or the insurance firms of this, but it was something the Ontario government hadn't really done when it procured technology products and services."

It's a lesson for Canadian small and medium-sized enterprises, most of which don't have in-house legal counsel either. Founded by entrepreneurs who have already proven themselves adept at handling finance, human resources and other roles, company decision makers may assume that hammering out a service-level agreement for technology is not much different than negotiating a lease for office space. But it is different, and as business models change in the software, hardware and IT services industries, those CEOs could one day find themselves in a courtroom, or worse.

"If they don't negotiate a deal that gives them a proper risk management mechanism or remedies to fix [problems], proper indemnities and a recourse when something goes wrong with the project, they could go out of business," Mr. Card says. "We're talking about industry-specific business norms they don't know anything about."

Many small to medium-sized firms, for example, might hire a software developer to create an application that helps them run their business. What they often don't realize is that, once that project is complete, those firms have no inherent right to treat that software as their own secret sauce.

"How many medium-sized business owners know that business contractors own the intellectual property they create? There is no 'work-made-for' concept in Canadian law," Mr. Card says.

Other sticking points include the minimum and maximum liabilities in a contract, the exact requirements, exclusions or exemptions, and a host of other potential pitfalls.

The policies and procedures large companies use to stickhandle the legal issues around IT contracts is sometimes referred to as vendor management, and an international association called Caucus regularly brings professionals from a variety of procurement roles together to improve the way it is done. Earlier this week, Caucus hosted a conference of its Toronto chapter that included a two-day workshop on vendor management and contract drafting.

Sam Barton, a 43-year veteran of the IT industry who worked in the U.S. Marine Corps., Fluor Daniel and Northrop Grumman before joining Toyota Motor Sales, helped lead one of the sessions.

You don't have to tie up the attorneys if you have experienced contract folks, Mr. Barton says, although he acknowledges many smaller firms won't have a dedicated contracts group. "If you use outside people, you have to be careful, though, because consultants will nickel-and-dime you to death."

Writing up the basic terms and conditions in an agreement is not that difficult, Mr. Barton adds. It's the technical considerations that are specific to IT contracts that befuddle inexperienced executives.

"You have to understand how software is licensed. You have to understand how it's been utilized, how it's deployed. . . . If it's an outsourcing agreement, you have to understand exactly what's being outsourced."

Mr. Barton says he was involved in a call centre outsourcing deal, for instance, in which nine months were spent just writing the requirements. That may seem like a long time, but Mr. Card says the right legal expertise can ensure negotiations don't drag on even longer.

"Most of the mythology around retaining legal counsel is absolutely wrong," he says. "Experienced IT counsel can create an end-of-task timeline and schedule that can often expedite these projects."

Procurement has always been tricky, but more so now because software is being sold less as a product in a box and more as a subscription-style service. The same goes for hardware, where computing power is sold "on demand." These business models can bring customers more flexibility, but also more risk and uncertainty. Hence the need for better vendor management.

"The least complicated type of situation is where you have a customer buying off-the-shelf products and services," says Maxwell Leveson, in-house legal counsel for Sun Microsystems of Canada. "The issues will come up around things like IP ownership when you move away from that to a service delivery model where it's retained by Sun. Then there are a lot more nuances."

Sun doesn't always deal with expert counsel when it contracts with small to medium-sized firms, Mr. Leveson says, but he admits retaining a specialized IT lawyer could be useful, if only for final approval before a deal gets done.

"It's also about the nature of the transactions, the jurisdictions and the risks that are involved," he said. "What's a business norm, anyway? It's a generally accepted principle of what's commercially reasonable in a given situation. The more the norms consolidate, we'll see less reinventing of the wheel."

Mr. Barton agrees, noting that it is possible to negotiate with vendors to bring outsourced services back in-house or revise their contracts as their business needs change. "Your size [as an organization] shouldn't deter you from going after what you want," he says.

Whether they hire a lawyer or not, Mr. Card says firms should keep this in mind: A lot of IT consulting agreements are drafted as "deliverables," or what a customer expects the final product will be. In many cases, they are really advisory service agreements -- customers haven't gotten down to the brass tacks yet. And depending on how you handle them, those brass tacks can really hurt.

Shane Schick is editor of ITBusiness.ca.

sschick@itbusiness.ca