Forming an IT Outsourcing Contract

Nearly all IT consulting and outsourcing companies will work under a contract- usually for a specific length of time, or until a specific project is completed (if you’re using the firm for temporary work).  The contract is an agreement to perform services for a specific costs- the service level agreement, or SLA, outlines the specific details.  The contract itself should include:

Cost and Scope of Work

The contract should specify in plain terms exactly what it is you’re purchasing, and how much you will pay.  Don’t get too specific in the actual contract.  For example, a provision that on-site support be available every Monday is more suited for a service level agreement.  For most services that are ongoing, you’ll pay a monthly rate for a defined period of time.  It’s a good idea to get a “benchmarking” provision included, especially if you’re entering into a lengthy contract.  Benchmarking allows you to have rates evaluated by a third party if you suspect that costs for already-contracted services have dropped well below prior rates- a valuable tool in IT contracts, where prices can fall quickly as technology improves.

Work Monitoring/ Governance

Many IT professionals and IT management consulting firms actually advise using governance software- a tool that allows you to evaluate work as it is completed.  The service contract should contain provisions that specify what happens if service level requirements are not met, and how requirements will be monitored.  Keep in mind that no contract is a substitute for good communication- the best way to make sure you’re getting the services you contract for is regular, clear communication with your IT provider. 

Disengagement Plan

The disengagement plan is the “worst case” scenario- what happens if you can no longer work together and need to terminate the contract.  This is a very important element of the contract itself, especially in an IT context, where a company has access to your infrastructure and information.  Make sure ownership rights, transfers, and other issues are addressed.  If your contract is especially large in scope or involves complex ownership and licensing issues (SaaS, web hosting, etc.) it may be a good idea to have an attorney review the document. 

Service Level Agreements and Other Concerns
SLA’s specify everything that the contract doesn’t- the “nuts and bolts” of the transaction.  Depending on the services you contract for, the service level requirements should be fairly specific, and include concrete information whenever possible (helpdesk available XX hours daily, etc.)

An issue that often arises when outsourcing IT is foreign companies- since many IT providers are based overseas, U.S. contract law may not govern certain provisions.  While this may not be a concern of smaller businesses looking for helpdesk support, larger companies seeking inexpensive data storage will likely encounter foreign regulations at some point.  Again, it can be helpful to have an attorney review especially complex agreements.  Make sure that you know what you are contracting for before you enter in to an agreement.

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