Does this simple idea solve IT outsourcing contract problems?

In recent years a constant push to control costs while taking advantage of emerging IT technologies has led to a boom in IT outsourcing.

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Are “evolutionary contracts” an answer?

Because IT services touch so many mission-critical parts of an enterprise, IT vendor contracts can be long and extremely detailed. However, in their a search for “certainty” and cost-control, many enterprises may find themselves in an awkward position when IT tech changes, or vendors need to be more agile to solve complex IT problems.

 Suddenly that IT services contract based on a detailed RFP morphs from a safety net into a straightjacket, stifling innovation efforts.

 One consultant thinks he has a simple answer to the problem, something he’s called “evolutionary contracts.”

 A recent article on IT Outsourcing News features a short interview with Thomas Young, an IT outsourcing consultant with the Stamford, CT-based Information Services Group.

The article is a short interview with Young, who sheds a little light on the idea of “evolutionary contracts.” Young says that the central problem with IT today is that “certainty is not part of the equation. I can put pricing and terms in place that deliver false certainty, but you will be dissatisfied. The market is so dynamic today that what you need is a flexible arrangement.”

What he proposes instead is that companies focus on an “evolutionary” approach to their contracts. What he means is starting out with a basic structure that serves as a master service agreement – and the rest evolves over time.

Young says this requires a different kind of relationship between the customer and the IT vendor. Companies need to think of IT vendors as a better “fit” as future partners rather than just someone who can fulfill on an RFP.

It’s an interesting idea, though it should be noted that Young says to date he has “no takers” on the idea.

Still, it might be a trend worth noting. As IT vendor services become critical to businesses of all sizes, the need to manage those contracts becomes more critical too. For instance, what if a contract with an IT vendor to create an iPad-friendly version of a company’s website changes into a need for a mobile-friendly version? Do all contract terms, definitions, conditions still apply? Is anyone recording these changes in electronic form? Does this affect legal condition of the old contract? What if accounts payable starts receiving invoices for “unapproved” services?

Without a process to centralize and track contract changes, there can be a lot of room for confusion within a company when IT contracts change. Being nimble with contract management can help companies be more nimble when dealing with rapidly changing technology. 

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