Artificial Intelligence (AI) tools are revolutionising the way businesses operate, offering solutions that can streamline processes, enhance customer experiences, and improve efficiency. Whilst the speed at which this is happening can be quite frightening to think about, for small and medium-sized enterprises (SMEs) in England, investing in the right AI tools can provide a competitive edge. Procuring and integrating these tools is not without its challenges and risks, and it’s important to approach the process with a clear understanding of the legal and commercial implications.
Here are five top considerations when procuring AI tools for your business:
1. Understand Licensing and Ownership
AI tools are typically provided under licensing agreements, rather than outright ownership. It’s crucial to understand the scope of the licence you’re purchasing:
- Is it a perpetual or subscription-based licence?
- Are there limits on the number of users or devices?
- Does the licence include updates or upgrades?
Pay particular attention to whether the AI tool allows you to retain ownership of any data or intellectual property generated using the tool. This is especially important if the AI is processing proprietary business data or creating outputs that are integral to your operations. If it sounds too good to be true on costs, there may well be a reason for that!
2. Ensure Compliance with Data Protection Laws
AI tools often rely on large volumes of data, some of which may include personal data. Under the UK General Data Protection Regulation (UK GDPR), SMEs must ensure that any processing of personal data complies with data protection principles. Key points to consider include:
- Does the AI provider process data on your behalf (making them a data processor)?
- Is there a clear data processing agreement in place?
- Where is the data stored? (Check for compliance with UK data transfer regulations if data is stored outside the UK.)
Failing to address these issues could expose your business to significant regulatory fines and reputational damage.
3. Evaluate the AI Tool’s Accuracy and Bias Risks
AI systems are only as reliable as the data they are trained on. It’s important to assess the accuracy of the tool and identify any potential risks of bias. For example:
- Does the AI provide explanations or transparency about how decisions are made?
- Has the provider taken steps to minimise bias in its algorithms?
Using an AI tool that generates biased or incorrect outputs could harm your business operations and reputation, so diligence in this area is vital.
4. Negotiate a Clear Service Level Agreement (SLA)
AI tools often require ongoing support and maintenance. When entering into a contract with an AI provider, as with any Software as a Service (SaaS) agreement, you should ensure that the Service Level Agreement (SLA) clearly sets out:
- Guaranteed system uptime and performance standards.
- Response times for technical support or issue resolution.
- Procedures for handling updates, patches, or system failures.
Without a well-defined SLA, your business could face costly downtime or inadequate support.
5. Plan for Vendor Lock-In and Exit Strategies
AI tools can become deeply integrated into your business processes, making it difficult to switch providers. To avoid vendor lock-in, consider:
- Whether the tool supports interoperability with other systems.
- What happens to your data if you decide to end the relationship with the provider.
- Whether the contract includes provisions for smooth transitions to alternative providers or systems.
An exit strategy should be a part of your procurement plan from the outset, ensuring your business retains flexibility and control.
How a Commercial Lawyer Can Help
The procurement of AI tools involves navigating complex contracts and ensuring compliance with evolving regulations. At Scott Bailey LLP, we have years of experience in advising SME businesses on technology procurement. Our expert advisers can:
- Review and negotiate supplier contracts.
- Advise on data protection compliance.
- Help draft SLAs and ensure fair licensing terms.
- Assist in managing risks associated with AI implementation.
If you are considering adopting AI tools for your business, or SaaS products, get in touch with our commercial solicitors in Hampshire today. We’ll ensure your contracts and compliance measures are in place, so you can focus on leveraging AI to drive your success.
Contact us today to learn how we can support your business’s digital transformation.
