Outsourcing contracts - Understand the small print

Outsourcing part of its business is a big decision for a company to make, so it is very important that the details of the outsourcing contract are fully understood. Organisations keen to switch service supplier may be a little apprehensive when navigating contracts - and this is understandable given the complex nature of these documents.


Service level agreements (SLAs)

Service level agreements (SLAs) represent one of the main points of consideration when dealing with outsourcing contracts. SLAs detail the scope of the services to be delivered and explain the responsibilities of the service provider as part of the arrangement - essentially clarifying what is really being offered. These terms tend to be thoroughly negotiated from the start and the responsibility of the service provider can vary depending on the requirements of the user organisation.

SLAs are highly valued by clients as they allow them to get certain clauses built into the contract, meaning the service is more specific to them. This customised approach is beneficial to clients as it allows them to make use of the stipulations they believe to be most useful.

Both parties are likely to place great emphasis on the finer details of an SLA, as they are designed to benefit all concerned - contracts not only explain the methods to be used to measure service levels, but also clarify any potential confusion regarding the expectations of the provider.

To make sure these expectations are met - and to ensure both parties get what they need from the agreement - SLAs often include penalties and benefits. In terms of penalties, these can include service credits (pre-specified amounts of money the customer is entitled to when a service level is not achieved) and liquidated damages (an agreed sum payable to one party if the other breaches the contract), which are worked out using potential losses incurred by the customer. Benefit sharing, on the other hand - such as the provider earning additional profit for achieving improved results - is one way of rewarding a service provider for a job well done.


Length of contract

Contracts vary in length, but signing up to a long-term deal should not always be perceived as a negative - indeed, lengthier agreements often prove more beneficial for all concerned.

Longer term contracts, such as those that last the lifecycle of new technology - typically between three and five years - demonstrate the outsourcing provider not only views the relationship as long lasting, but is taking a long-term view of the customer's needs.

This means the outsourcing company can assist its clients when strategies are being drawn up and help to analyse how well they are performing over time.



An attractive aspect of outsourcing contracts is how flexible the outsourcing provider is willing to be in terms of what get written into them. The most effective outsourcing relationship will be one that is flexible, and where the provider is willing to create bespoke services to meet the needs of your business.

Be sure that any bespoke services that are being proposed are detailed carefully in the contract, and that the service will work best for you.


Esteem Systems is a specialist managed services provider for IT infrastructures, with these processes designed to help customers make better use of their IT.





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Wednesday, 24 July 2019
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