“Contracts have to stand the test of time and that rule of thumb is no
different for cloud-based Information Technology Outsourcing (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 ITO
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:
“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,
“Drafting ITO Contracts in the Cloud” on http://www.outsourcingleadership.com/.
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.
