When selecting an IT service provider, IT leaders recognize that competitive pricing and performance are table stakes. The often-downplayed task of specialized contract negotiation is equally critical. The contract serves as the central document that determines how agile your organization can be in response to evolving needs. The following are key terms and conditions that are essential to negotiate in your IT agreements, ensuring your business remains well-equipped for the future.
Automatic Renewals
Many service providers incorporate automatic renewal language on services. Considering your technology needs may be different two years from now or the office environment may change, negotiating language that stipulates services convert to a month-to-month term at the end of the initial term can prevent being locked into services that are not fulfilling the need they once were.
Portability
A portability clause is exceptionally useful, particularly among organizations who expect the business environment to change. Perhaps a move is planned 8 months from now, but a dedicated Internet circuit is needed today and the service provider requires a minimum 12-month agreement. Adding a portability clause to your contract may allow installation of a new circuit at the new building without incurring early termination penalties for disconnecting the old circuit.
SLAs with Chronic Language
Even the best technology and provider are prone to performance issues and outages. While every business should implement back-up services whenever possible, service level agreements (SLAs) should be a standard item you ensure your provider includes in your contract. This should include language to address chronic performance issues and the ability to replace or cancel the service, should problems persist.
Technology Upgrade
As technology evolves, most existing service agreements do not. This means customers may find themselves bound to services that do not meet today’s business needs, or they become subject to technology retirement or end of life support for services without a backup plan. Negotiating a technology upgrade clause can help address this; in many cases, it allows “switching” to a newer service or technology in place of the existing technology without penalty.
Early Termination liability
Some service providers may offer flexibility on early termination liabilities when asked. Unless a service is offered on a month-to-month basis, customers are committed to the service for the duration of the term or otherwise face paying early termination fees if the service is disconnected early. Ask your provider if they can offer a reduced termination fee structure in the event of unforeseen circumstances.
Understanding the nuances of IT contract terms and conditions is crucial for safeguarding your business operations. With over two decades of experience managing IT services and navigating thousands of provider contracts, we’ve encountered a vast array of terms—from the aforementioned list to more specialized terms like business-downturn provisions and milestone credits. It’s essential to know the terms that best suit your IT requirements and to partner with providers who are prepared to negotiate terms that cater to your business’ evolving needs.
