- What is a contract? - Understand the concepts of outsourcing relationships - To explain some of the different contract types involved in outsourcing - Typical reasons for outsourcing - Contracting parties - Key aspects to clarify when outsourcing - Commercial aspects - General principles - Checklist

1. IT outsource contract fundamentals

2. Outsource
contract
fundamentals
Objectives
• What is a contract?
• Understand the concepts of outsourcing
relationships
• To explain some of the different contract
types involved in outsourcing
• Typical reasons for outsourcing
• Contracting parties
• Key aspects to clarify when outsourcing
• Commercial aspects
• General principles
• Checklist

3. What is a
contract
• The contract is between the IT
service provider and the client.
Contracts must be aligned with
Service Level Agreements.
• Principles of outsource contracts
• Aspects and importance of due
diligence
• Contracting team
• Contractual deliverables

4. Contract Types
• Full outsource of all functions
• Partial (or hybrid outsource) of selected functions and components
• Outsource of single service

5. Models
• Service integrator
• Organisation
• Single service provider
• Multi-sourcing
• Organisation
• Multiple service providers
• Service integrator and management
• Organisation
• Single service provider managing multiple secondary service providers
The organisation can be a single company
or multiple companies under a single
umbrella!

6. Commercial models
• Month to month
• Annual contract value
• Project revenue
• Gain-sharing model
• Bonuses and incentives
• Vendor-funded model

7. Key concepts
• Sustainability
• Service definition/terminology
• Complexity
• Length of contract
• Contract value
• Service credits/penalties
• Liability
• Nature
• Cloud
• Data protection
• Data sovereignty

8. Key aspects
• Legal obligations and regulatory requirements
• Key personnel (Section 197)
• Underpinning contracts by service provider
• 3rd paryt contracts used by client
• Engagement
• Due diligence
• Bilateral guarantees
• Termination
• Transition

9. Key aspects
• Renewals
• Transition pricing
• Benchmarking
• 3rd party management fees
• Fixed pricing
• Upsell pricing
• Net book value of existing assets and co-terminus concept

10. Typical reasons for outsourcing
• Customer has reasons for outsourcing and service provider has reasons for the
outsourcing opportunity
• Refer to strategic imperatives
• Examples of outsourcing opportunities include:
• Infrastructure
• Datacentre
• Applications
• DevOps

11. Contracting parties
• Operator
• Owns the infrastructure – does not bill the customer
• Service integrator
• Specialises in bringing together multiple service/systems/products
• Co-ordinating delivery
• Multiple bills with mark-up of integration and management (SIAM)?
• Service aggregator
• Aggregates the bill
• Bring together an end to end service using multiple vendors in a multi-tenant model
• Assuring supplier performance
• Governing the relationship

12. Contracting parties
• Service Provider
• One or more services (ISP, Apps, Infrastructure, Cloud, DevOps)
• Delivered internal or external
• Generates the bill

13. Contracting parties
Key personnel
• Service level manager (SLM)
• Service delivery manager (SDM)
• Service delivery executive (SDE/CSM)
• Financial manager
• Programme manager
• Solutions Architect

14. Service delivery manager
• Actual delivery of services against contract, including SLAs, OLAs and underpinning
contracts
• Owns the client’s experience of the services offered by the outsourcer

15. Service Level Manager
• Responsible for negotiating Service Level Agreements, and ensuring that these are
met.
• Monitors and reports on Service Levels, and holds regular Customer reviews.

16. Service delivery executive / Customer
service manager
• Operates as the point of contact for the customer to the service provider
organisation.
• Manages the expectations of the client and ensures that existing and potential
service requested are fulfilled.

17. Contract
Checklist
• Legal entities
• Services provided
• Service levels, or referenced SLA
• Service constraints, such as volume limits
• Support arrangements
• Measurement of service levels: metrics, mechanism
• Reporting: content, frequency and distribution
• Compliance with standards
• Regulatory requirements
• Security requirements
• Continuity assurances
• Duration of contract
• Conditions and process for renewal
• Costs and payment terms
• Incentives for performance
• Penalties for non-performance
• Roles between contracting parties

18. Contract
Checklist
• Communications contacts, process and frequency
• Level of site access
• Right to access and right to audit
• Timeframe and plan for implementation
• Process interlocks, e.g. incident, problem, change, configuration...
• Agreed improvement programme
• Confidentiality and/or announcement
• Intellectual property rights and ownership
• Liability and limitations
• Non-disclosure guarantees
• Problem resolution process
• Review process
• Dissolution process
• Modification process
• Legal approval
• Management approval

19. Review
Contract
fundamentals
Outcomes
• Familiar with the justifications for outsourcing
• Review key aspects to be covered in the
contracting process
• Analyse the type of outsource contracts
typically used globally

20. Outsource contract fundamentals
Assignment
• Brainstorm in groups on
the reasons why a
contact centre would be
outsourced and present
the reasons
• Categorise the example
contract types provided
• Identify key gaps for
each contract type