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Kodak bankruptcy raises issue of IT contract risk management

2/28/2012

The recent bankruptcy of the iconic New York-based Kodak company underscored the importance of risk management when it comes to IT contracts.

Simon Noonan, an expert with global technology research group Ovum, recently spoke with Australian news source Government News about the implications of the Kodak bankruptcy. He said that it shows any company is susceptible to bankruptcy, and businesses need to take steps to mitigate risk regardless of the size or reputation of the tech company involved in an IT contract.  

Noonan identified three major ways bankruptcies like Kodak's could affect tech contracts. Services could be disrupted, but this is not a major risk factor, as other companies can generally step in. Hardware provision poses a slightly greater risk, as alternate suppliers could be hard to come by, depending on the type of hardware at issue. By far the greatest risk exposure, Noonan said, comes from software contracts.

"The big challenge in risk management is software contracts, because it requires significant investment to train staff in use of software and there's long term investment involved - depending on the size of the install base," he said. "Alternate suppliers could take over the software contract if there are open standards, but a clear migration path might be much more difficult depending on the level of customization."

According to Kodak, its delivery of goods and services will not be disrupted while it reorganizes under Chapter 11 protection.