The article discusses the importance of a Relationship Management in IT outsourcing contracts, aiming at the achievement and maximization of the potential benefits intended in an IT outsourcing project

1. Alfredo Saad
IT Sourcing Consultant
IT Outsourcing Contracts: Relationship
between Parties
Dec 26, 2014
As an industry which lives an accelerated maturing process, IT services outsourcing, seen as a management tool, has
shown a significant progress concerning the attitudeand the vision of its leading figures: theclients and the providers.
But, there’s still much to do, as we will see, especially when we consider thespecificities related to thenewly
disseminated cloud solutions.
On theclients’ side, we observe an advance which results from a learning process, originated from their own
accumulated experience, from the consciousness of their own mistakes and from the observation of someone else’s
mistakes. Such advancement brought a better balance on the relationship between both parties, originally most
favorable to theprovider.
On theproviders’ side, we also observe an advance which brought them a greater capability to provide services which
effectively add a strategic value to the clients’ business and not only complement their operational deficiencies in
specific areas.
However, there’s much to invest in the relationship management area, which is, by theway, absolutely vital for the
effective accomplishment of thepotentialbenefits of an outsourcing project. This area is ultimately responsiblefor
the prioritization of the services, for theverification of achieved results and for the continuous pursuit of
improvement and innovation opportunities along thecontract lifetime as a responseto the dynamic requirements of
the clients’ business.
Most outsourced services management processes focus only on the operational aspects, mainly those related to a
bureaucratic contract administration. They have been built almost as an extension of theclients’ budget control
mechanism. Such process are primarily exercised after the occurrence of the facts and oriented to a mere verification
about thefulfilment of the contractual obligations by both the provider and theclient.
Although such processes may be effective in light of their strict purpose, as they enable to take corrective actions
aiming at operational adjustments, they ignore all dimensions of a proactivemanagement of theassociated
contractual risks.
However, as outsourcing projects frequently also embodies a strategic intent, such relationship management process
should not only deal with administrative and operational issues but mainly with theanticipation and prevention of the
materialization of such risk factors.
Many of the problems which arise along the lifetime of an IT outsourcing contract could be avoided, or at least
minimized, through a systematic process which must focus on the permanent exercise of the relationship management
discipline between providers and clients. To focus adequately, it is necessary to distinguish between the issues which
take into account the formal aspects of the contract (for instance, assuring that its terms and conditions are fairly
founded, that the service level agreements are adequately built, etc) and the issues which lead to the real success of
the contract, such as a mutual trust and respect, frankness and transparency, a partnership mindset, a risk-reward
sharing attitude, etc.
A correct and balanced approach to both aspects is vital if the parties want to maximize all potentialintended benefits
towards a successful IT outsourcing project. Frequently, however, the formal issues are overvalued relatively to the
behavioural relationship issues and the client’s and provider’s management levels don’t seem to be able to understand

2. and administer the complex challenges which emerge during thedynamic and interdependent kind of relationship
which prevails on an IT outsourcing project.
Also, on theclients’ side, it is many times supposed that theresponsibility to invest in the quality of therelationship
is not theirs, but the providers’ only. Theseclients erroneously supposethat if they evidence any especial interest
about this matter, they will undermine their bargaining power.
The relevance of this topictends to be yet more emphasized in a scenario with multiple providers, which is typically
prevalent on cloud environments, for which tens of providers may coexist, not always in a peaceful way, each one
responsible for a specific segment of the entire service. Moreover, this factor adds still to a certain degree of
immaturity of the cloud services market. Such immaturity, mainly on the clients’ side (but in a certain degree also on
the providers’ side), may be detected especially during two critical steps of any IT outsourcing project: the contract
negotiation and the contract governance, both of which must deal with cloud-related relevant specificities as
compared to a traditional ITO contract.
In future posts, wewill discuss in detail theelements of a relationship structureas well as thetypicalproblems
identified and how to overcome such difficulties. We will also be discussing all cloud-related specificities which must
be taken into account during thenegotiation and governance of the contracts.