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Special Series: The IT Agenda
F E A T U R E  
Let's Make a Deal

  April 15, 2002
  By Sean Doherty

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Executive Summary

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 Executive Summary
Here are 10 things to consider when negotiating a contract with a service provider:

PREPARATION

• Start by knowing the goals and benefits for both parties, as the service provider is about to become your strategic partner.

• Service providers have done this more than you have. Beware of boilerplate contracts.

• Know the cost base of the service model you're outsourcing to find the appropriate outsourced service levels and expenses.

NEGOTIATIONS

• Look for ways to reduce risk for both parties.

• Plan for change by negotiating annual rather than five- or 10-year contracts.

• Consider giving partners incentives to keep costs down, such as offering commissions or other bonuses for bottom-line growth.

• Make sure you have a way out. Exit clauses help both parties get out of the relationship gracefully.

EVALUATION

• Service-level agreements are mandatory!

• Establish specific performance levels and specify ways to measure them.

• Define monetary and credit-based penalties for failure to meet agreed-upon levels.


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