How to Create an IT Outsourcing Contract

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As outsourcing becomes the norm, many companies are working to incorporate the outsourcing process into their regular operations. Part of this process includes contracting employees and adhering to those contracts.

IT consulting and outsourcing companies usually work under a contract for a specific length of time, or until a project is completed. This contract is an agreement to perform services for a predetermined cost, and the service level agreement (SLA) outlines the details of this work.

Here is a guide for creating this basic, yet very important, document for IT outsourcing.

1. Specify the cost and scope of work.

Contracts specify in plain terms what you will be paying for and how much you will pay for it. But, the actual contract doesn’t have to be too specific; save these details for the service level agreement. For ongoing services, you will likely pay a monthly rate for a defined period of time. Include a benchmarking provision, especially in a long-term contract, to be sure you are hitting goals. This provision will come in handy if you suspect that costs for already-contracted services have dropped below prior rates (something that happens often as technology improves); at this point, you can have rates evaluated by a third party.

2. Define how you will monitor work (work governance).

The contract should include provisions that state what will happen if service level requirements are not met, as well as how requirements will be monitored. However, having a contract in place does not mean you are off the hook for clear, regular communication. Communicating with your IT provider, or with your client, will help you avoid future headaches.

3. Make a plan to disengage.

Expect the best, but prepare for the worst. Implementing the disengagement plan is the worst-case scenario, but you still need to create it. If you find you are no longer able to work together and need to terminate the contract, you will be glad you have this plan to refer to. This element is especially important in IT where a contractor has access to your information and infrastructure. Include ownership rights, transfers, and any other security concerns you might have. If your contract is large in scope or involves complex licensing issues, you may wish to have an attorney review it.

4. Document the Service Level Agreement.

The SLA is the nuts and bolts of the transaction, specifying all the details that the contract doesn’t. This document should be specific and include concrete information such as how many hours a day the helpdesk will be available, or which days of the week service will be provided. If it is important, make sure it goes into the SLA.

A note about foreign outsourcing:

If you plan to outsource IT services to a foreign company, you need to be aware of certain legal issues. Since these providers are based overseas, U.S. contract law may not apply to some provisions. If you are a smaller company looking for helpdesk support, this issue may not concern you. However, if you are a larger company outsourcing data storage, you can expect to encounter foreign regulations at some point. It can be helpful to have an attorney review these types of contracts as well so you can be sure you are crystal clear on what you are contracting into.