The service level agreement why its needed in an outsource
In this article I outline some of the key aspects that have to be specifically articulated within the SLA. As I have in my other articles many companies are beginning outsourcing for the first time, sometimes with an inexperienced team who face a band of canny outsource vendors who do this every day for a living.
As a general rule, particularly for large-scale outsourcing, involving many millions of pounds over the life-cycle – get professional help. This can be in the form of consultants or lawyers well versed in the detail of outsource contracting – at least it will level the playing field. This is particularly important in spotting omissions made during the contracting and negotiation process. As senior managers we all think we know the detail of our business; however, whilst we may be good at checking what is written down before us, but we are not good at spotting significant issues that are missing
In terms of the agreements what is in the agreement that is usually not the problem but what has been left out. In an IT context the chief information officer (CIO) reviewing the agreement may easily spot errors in a service description, say, for the local area network (LAN) availability targets. However, it is rare to see spelt out how the intellectual property rights (IPR) issues of any software developed during a contract are handled; what is said about the transfer of technology back to the buyer should the agreement be terminated – for example how is the technology upgrade accounted for in the final liquidation of the contract? Will all personnel records be handed over? How will the supplier cooperate fully with a new service provider should the contract need to be terminated?
All these types of questions need to be considered and included in the discussions up-front – which makes some of the clauses in the contract look very similar to a prenuptial agreement. Negotiate all the points, agree them, then write them down in the contract. If it is not in the actual signed agreement it will be difficult to return to unclear or missing points, and many buyers will be confronted with the need to raise a request for change to get any missed points into the agreement at a later stage. At times the negotiation will be difficult – avoid the temptation to fall back on a ‘partnership’ discourse and assume you can ‘sort it out later’. Without a process in place to sort out any outstanding issues the agreement will fail before the ink has dried – so clarify, negotiate and specify in the contract.