Graham Perry

Smarter IT Outsourcing Contracts

Now is a good time to review your IT outsourcing approach and contract terms and simplicity is the key to getting the best out of your deal.

One effect of the recession has been the number of outsourcing deals signed in haste to reduce an organisation’s costs. A recent report by the London School of Economics suggests that many of these deals will be terminated shortly on the grounds that they are not appropriate for business as the economy improves.

Coupled with the fact that many older outsourcing deals will come up for renewal or rebidding then now is a good time to review your approach and your contract terms.

As the outsourcing market has matured the corresponding commercial agreements have evolved to give more protection to customers to ensure they receive the benefits they were supposed to - however, sharing of this knowledge is not always easy.

Most outsourcing contracts are complicated and get more complicated during the negotiation phase.

KEEP IT SIMPLE
It is important to define a few design principles for an outsourcing agreement.

Typically managers who negotiate an outsourcing deal are not the ones who have to make it work. Capturing and articulating the essence of a deal is important not only for the customer’s staff but also for those of the service provider.

Altica recommends the following design principles for the agreement:

• Simplicity
• Clear accountability for delivery
• Measurement and articulation of benefits
• Escalation process

Agreements tend to run to many pages and are typically constructed to cover circumstances when things go wrong. If things do go wrong (and they will) good processes are more useful than detailed contractual terms. This way the problem is solved and the relationship continues to grow.

Article Tags: Outsourcing Contracts

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