IT Governance

7 Tips for Managing an IT Outsourcing Contract

Ambiguity is often a good thing in art; it is enjoyable to interpret a painting or the ending of a novel. But in business, ambiguity is the devil, and it can tank operations. Especially when it comes to IT outsourcing contracts, specificity is the goal at all times. In an article for, Stephanie Overby shares seven tips that can make all the difference between a happy relationship and a bitter feud in contracting:

  1. Control your communication.
  2. Require the provider to log requests and complaints.
  3. Clarify vague terms early.
  4. Send breach notices right away.
  5. Never do the provider’s work without giving them an opportunity to do it first.
  6. Look for win-wins following a breach.
  7. Keep legal counsel for contract review.

Inarguable Success

To control communication, designate one person on the customer side to have authority to speak to the service provider. By empowering one knowledgeable individual to represent the business, it prevents the provider from asking less knowledgeable people on the customer side to authorize contract changes that may ultimately hurt the customer business. Likewise, if the provider has a request or complaint to make, it should always have to be formally logged for future reference.

No matter how solid the contract, it is possible that situations will arise that were not considered while drafting it. In such cases, customer and provider should have a meeting of the minds early on as to how to address that ambiguity. Write down and get signoff on what is agreed upon. Details like these are not worth the risk of just hoping they will work themselves out over time.

On that same note, if the provider breaches the terms in any way, customers need to be vocal about it right away. Being passive, saying nothing, and hoping service improves by itself is only going to leave the customer business in a weak, unsupportable legal position if things ever escalate to a court proceeding. The customer can further protect itself legally by not doing the provider’s work without giving them an opportunity to do it first. To forge ahead with the provider’s work out of frustration can itself be a breach of contract.

But hey, not every aspect of this process needs to be gloomy and wrist-slap-laden. Customer and provider can seek win-win situations:

An IT service provider at some point is likely to offer a waiver on a credit due for a breach and, in many cases, that is an opportunity for the relationship manager to trade that waiver for some future assurances. They might trade a performance credit waiver for a larger assurance on a future milestone or a root cause analysis of the breach and demonstration that the issue has been fixed. This approach “increases the change of successful outcomes, and you build a relationship built on trust and mutual understanding,” [attorney Brad Peterson] says.

For additional help, call in a lawyer or two. They may be able to extract meanings and implications from a contract that neither party had realized is actually there. That is the dark and foreboding power that lawyers possess.

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