Alsbridge Shares How to Successfully Contract ITO in the Cloud
“Contracts have to stand the test of time and that rule of thumb is no different for cloud-based ITO agreements,” Trowbridge says.
“However,” continues Trowbridge, “the difference with cloud is the commercial and business model within which it operates. Specifically the location of data, potential multi-tenancy agreements, on-demand hugely scalable and agile services (up and down); interoperability are all significant issues which impact the ‘consumer’ style models compared to enterprise wide solutions.”
As with contracting for traditional IT Outsourcing services, Trowbridge recommends that a detailed understanding of service provision and delivery is vital before entering into contractual commitments.
Typical areas for focus during negotiations include:
• Service Level Agreements
• Service Credits
• Service Security
• Service Business Continuity
• Service Costing Formulae
• Service Payment Provisions
• Data Ownership & Protection
• Legal & Regulatory Compliance
• IP Protection & Reward
• Software Licensing
• Software Escrow
• Choice of law and jurisdiction
• Third party rights
• Duration and termination rights
• Change of control
“We know that cloud-based contracting is forcing major change in the global outsourcing community,” Trowbridge says. “It’s affecting pricing, transparency, contract terms, and suppliers; generally everything it touches,” Trowbridge adds.
Companies can expect more transparent pricing, shared intellectual property and pooled licensing. And, because cloud contracting offers easy switching between suppliers, at the end of the contract or specific service requirement, customers may switch off or move to another supplier. As a result, suppliers will consider contractual terms to restrict movement; for instance, maximum year length contracts, minimum termination clauses, and open standards for connecting.
“Customers are going to find success in the cloud when they work collaboratively with their partners to move toward cloud-based services that are integrated with traditional core infrastructure,” Trowbridge concludes. “Those are the contracts that will stand the test of time.”
More information can be found in an Alsbridge whitepaper titled, “How to Draft IT Outsourcing Contracts - Traditional and for Cloud” at Outsourcing Leadership.
About Alsbridge, Inc.:
Alsbridge, Inc. is an award-winning global advisory firm and a distinguished member of the 2010 Inc. 500 fastest growing privately held companies. Alsbridge redefines the way companies reduce costs and improve back office operations. Our proprietary benchmarking tools and data resources enable clients to utilize the most cost effective and value added sources globally for information technology, business processes and telecommunications networks. Through a combination of internal optimization and outsourcing, our clients achieve cost savings that support their strategic business objectives. Founded in 2003, Alsbridge is the proven, effective difference. The company’s web site is: www.alsbridge.com.
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