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Information Technology Contract and Agreement: How to structure an IT outsourcing project

This article gives you a high level framework to structure an IT outsourcing project from the perspective of contracts and agreements.

Firstly, you need to identify the type of outsourcing model you would want to adopt. Once you have decided the model, the following contract and agreements apply for each situation. 

Master Services Agreement

A Master Services Agreement or MSA is apt for contracts of higher value and longer duration. This agreement will cover a lot of corporate level regulations that otherwise need to be included in individual work orders.

MSA, once agreed and signed by the vendor will act as an umbrella agreement under which Work Orders or Schedule(s) of Work or SoWs could be articulated.

If the contract is of shorter duration and if you do not have a long term strategy to work with a vendor, then an MSA will not make sense.

Typical MSA will have a term of 3 or 5 years.

Further, MSA will not include any specific project related clauses. These clauses and Service Level Agreement (SLA) clauses should be built into individual Work Orders or Statement of Work or SoW.

Under an MSA, you can run Staff Augmentation work orders, Managed Services work orders, Fixed Bid work orders and Managed Capacity work orders.

In some situations, Business functions would want to directly run IT projects, but may not have the time to delegate towards formalizing a complicated outsourcing contract. This is where MSA plays a big role and the business will have to merely structure a work order or SoW linked to the MSA.

A sample MSA can be downloaded here.

Work Order or Schedule of Work or Statement of Work (SoW)

A Work Order or WO, or Schedule of Work or SoW has to be made for individual programs of work that needs to be outsourced.

There are different flavours of SoWs depending upon the type of outsourcing model that you will pursue for individual programs of work.

There will be a Staff Augmentation (SA) SoW, add SLAs and deliverables to the SA version and you will get a Time & Material version, a Managed Services SoW and a Fixed Bid SoW.

Samples can be downloaded here.

With minor additions of corporate level regulations, all of the aforesaid work orders can stand on its own without an MSA. But as explained above, an MSA has its advantages.

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