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Does your company need to install AI functionality into its systems? 

Are you receiving AI models from vendors without knowing about it? 

Companies are confronted with both procurement of a new technology and a changing governance expectation for AI models. This outline and checklist can help your company effectively implement vendor-produced AI into your processes.

Is Your Own House in Order?

  • Determine your own AI governance priorities
    • Impose those priorities on your vendors
    • Create specific procurement documents and procedures for AI models
  • Decide what you want from an AI model/product/service
    • If you have specific needs from the AI model, highly specific SLAs may be necessary
    • If you are testing to see how it can help you, then negotiate broad license

When Should You Buy or Build the AI Model?

  • Purchase use of an AI model from a vendor
    • Huge company/generalized AI versions
      • The more expensive option may meet your needs
    • Customized versions offered by companies aiming for your vertical market
      • Design accurate specs for best results
  • Develop a custom model to suit your purposes
    • Custom development could be entirely in-house production or involved a third-party AI developer.
    • If you engage a third-party AI developer . . .
      • Negotiate for full rights and ownership of model and outputs or
      • Allow vendor to use AI model base on the market
        • Consider excluding your industry
        • Consider negotiating for royalties on revenue from AI model

Traditional Tech Acquisition Matters: Questions to Ask

  • How does your company want to use the technology?
  • What are you paying for?
    • Can you find a result-oriented description of the AI product/service built into the contract?
    • Does the contract have realistic service levels for the role of the AI product in your business?
    • Do you have exit ramps if the product is not working for your business?  What are they?
  • Will vendor stand behind it?
    • Does the vendor provide any representations and warranties?  Are they full of exceptions?  Do they cover your company’s AI priorities?
    • Does the vendor offer an IP infringement indemnity?  What’s the scope?  Is it capped?
  • Will vendor advance development?
    • Look for language around continuous performance improvement and/or build in conformity assessments
    • Does the vendor offer to provide access to next generation models? 

AI-Specific Concerns: Key Topics To Cover in AI Vendor Agreements and Addenda

  • Use of the model
    • Can you do everything you want with the AI model?
    • What rights does the vendor retain?
  • Customer-led risk allocation
    • Risks from training, IP, and other development should be on vendor
    • Limit customer responsibility for risks of use
  • How accurate do you need it to be?
    • Responsibility for generative AI hallucinations
    • How do you know if the AI model is working as required
    • Specifications, ongoing vendor/customer reviews, and audits
  • Human oversight requirements
    • Do you really need visibility into process or additional human process management?
    • Will you be asked to justify how results were reached?
    • How do humans fit in the loop?
  • Ownership of IP and Data, and Restrictions on Vendor’s Use
    • Step beyond copyright considerations by specifying data use rights between the parties
    • Between the parties, who owns inputs/outputs?
    • RAG GenAI content and outputs
  • Privacy, Security and Privilege -Where does your data go?
    • Will your inputs/outputs be fed back into the model?  Is that model accessible to other vendor customers or just to your company?
    • What security steps are built into the product?
  • Bias and Discrimination
    • Look for vendor representations
    • Ask for specific tests and results
    • If your company needs to prove bias testing, then push for documentation of vendor’s bias testing process and results
  • Inner workings need not be a mystery
    • Disclosure of technical documentation
  • Regulator Guidance of AI acquisition and use – do you comply?
    • What does your company’s regulator say?
    • EU AI Act
    • Algorithmic decision-making
    • California and Colorado

Vendor Concerns in the Age of AI

  • Is there AI in other products/services acquired from vendors?
    • Look for embedded AI within software or consulting services
    • Ask the question and be prepared to probe deeper
  • Changing audit environment
    • Lifecyle audits for AI models
    • Audit of AI model training and testing processes