Artificial intelligence is changing the way organisations procure technology.

Businesses are no longer purchasing traditional software alone. They are increasingly procuring AI-powered platforms that generate content, analyse data, automate workflows and support business-critical decision-making.

The opportunities are significant.

So are the risks.

Many organisations continue to evaluate AI vendors using procurement frameworks designed for conventional software solutions. While those principles remain important, AI introduces new commercial, legal and governance considerations that require additional scrutiny.

Choosing an AI platform is no longer simply a technology decision.

It is a business risk decision.

Not All AI Solutions Are Created Equal

The rapid growth of the AI market has resulted in an expanding range of products, capabilities and deployment models.

Some platforms operate as general-purpose AI assistants.

Others are embedded within existing enterprise software.

Some organisations build their own models.

Others rely entirely on third-party providers.

Understanding how the technology operates is essential before contractual negotiations begin.

Organisations should understand:

• What the AI system is designed to do.

• Whether it generates or merely analyses content.

• How outputs are produced.

• Whether human review remains necessary.

• What limitations the vendor acknowledges.

Commercial decisions should be based on realistic capabilities rather than marketing claims.

Data Is Often the Biggest Commercial Risk

One of the first questions organisations should ask is:

What happens to our data?

Depending on the deployment model, customer information may be:

• Processed.

• Stored.

• Retained.

• Used to improve future models.

• Shared with subprocessors.

Understanding these arrangements is fundamental to managing confidentiality, privacy obligations and customer trust.

Procurement teams should ensure that contracts clearly address data ownership, permitted use, retention periods and deletion obligations.

Intellectual Property Should Never Be Assumed

Artificial intelligence introduces new questions regarding ownership of both inputs and outputs.

Before entering into an agreement, organisations should understand:

• Who owns AI-generated content?

• Can outputs be commercialised?

• Does the vendor retain any rights?

• Can confidential information become part of future model training?

• What protections exist for proprietary information?

These issues are increasingly important for organisations developing software, creative content, research or proprietary business methodologies.

Transparency Builds Trust

Organisations should understand how important decisions are being supported by AI.

While every model operates differently, customers should seek reasonable transparency regarding:

• Intended use.

• Known limitations.

• Human oversight expectations.

• Security controls.

• Testing and validation processes.

Transparency allows organisations to implement appropriate governance without unnecessarily slowing innovation.

Security and Privacy Cannot Be an Afterthought

AI platforms frequently process commercially sensitive information.

Accordingly, procurement teams should evaluate:

• Information security controls.

• Encryption practices.

• Identity and access management.

• Incident notification obligations.

• International data transfers.

• Compliance with applicable privacy laws.

Technology procurement increasingly requires close collaboration between procurement, legal, cybersecurity and privacy teams.

Responsible AI Is Becoming a Procurement Requirement

Many organisations are beginning to assess vendors not only on functionality but also on how responsibly AI has been developed and deployed.

Questions worth considering include:

• Does the vendor publish responsible AI principles?

• How are bias and fairness addressed?

• What governance framework exists?

• Is there meaningful human oversight?

• How are model updates managed?

These considerations are becoming increasingly relevant for regulated industries, government procurement and enterprise customers.

Contracts Should Support Long-Term Flexibility

Artificial intelligence is evolving rapidly.

Procurement contracts should recognise that today's technology may look very different in two years' time.

Commercial agreements should therefore consider:

• Future functionality.

• Service evolution.

• Model updates.

• Exit rights.

• Data portability.

• Transition assistance.

The objective is not simply to purchase technology.

It is to preserve flexibility as technology and business needs evolve.

Procurement Is Becoming Strategic

Selecting an AI vendor is no longer solely an IT decision.

It requires input from legal, procurement, security, privacy, technology and business leaders.

The most successful organisations recognise that responsible procurement creates confidence to innovate.

When governance is considered early, organisations are better positioned to adopt emerging technologies while maintaining stakeholder trust and managing regulatory expectations.

Questions Every Procurement Team Should Ask

Before signing an AI agreement, consider:

✓ How will our data be used?

✓ Who owns AI-generated outputs?

✓ What security standards apply?

✓ How is the system governed?

✓ What happens if the service changes significantly?

✓ Can we exit the arrangement without losing critical data?

✓ Does the contract support our long-term business strategy?

The answers to these questions often become more important than the purchase price itself.

Final Thoughts

Artificial intelligence is reshaping the way organisations procure technology.

The strongest procurement processes balance innovation with governance, commercial opportunity with risk management and operational flexibility with contractual certainty.

Organisations that ask the right questions before signing are more likely to realise the benefits of AI while avoiding unnecessary legal and commercial risk.

As AI continues to evolve, thoughtful procurement will become a key competitive advantage rather than simply an administrative process.

Need advice on AI procurement, technology contracting, data governance or commercial negotiations? Oceania Legal advises organisations on complex technology transactions, procurement strategy and responsible AI adoption.