Contract revision in IT companies

In the modern business world, thorough and structured contracts between clients and service providers form the foundation of stable and secure IT operations. These contracts not only define the services provided but also establish clear rules for collaboration, adherence to service levels, and legal protection.

An essential element of IT contract management is "contract revision". Contract revisions are necessary to ensure that agreements reflect IT operations' current status and requirements. This becomes particularly relevant when drafting new contracts, such as during contract renewals or when switching service providers. Revisions are also required when individual service schedules or the entire contract framework must be updated due to regulatory changes or technical adjustments.

In an era where comprehensive compliance—such as IT security and company-specific policies—gains importance, particularly concerning stakeholder requirements, meticulous contract revision is increasingly crucial. Businesses must ensure their IT contracts align with evolving structures in IT operations (e.g., cloud technologies or shorter lifecycle periods) and regulatory frameworks.

The success of a contract revision depends on several critical factors:

1. Willingness of both contracting parties
2. Formation of a contract team and clear definition of responsibilities on both the client and provider sides
3. Stakeholder resources: What stakeholder resources contribute to an effective and efficient contract revision and review? Both monetary and personnel resources must be carefully planned.
4. Relevant stakeholders: Which departments are involved in the process and play pivotal roles?
   • Procurement: Key stakeholder for price negotiations and procurement processes
   • Provider Management: Plays a supervisory role and will work with the contract later
   • Specialized Departments: Provide critical input and review technical changes and requirements
   • Data Protection and Legal Teams: Ensure the compliance of the contract framework
   • Management: Must be informed, holds the decision-making role, and is responsible for final contract signing

Both the client and the provider require these functions. Stakeholders must be communicated transparently to all parties, and decision-making authorities should be clearly defined to avoid delays and misunderstandings.

General Process of Contract Revision

1. Collecting requirements from specialized departments and key contacts
2. Structuring, aligning, and reviewing the contract content
3. Negotiations: Conducting a benchmark analysis may be helpful
4. Involvement of management or sponsors
5. Approval by management and contract signing

What a good contract framework should achieve

A well-constructed contract framework serves multiple functions that go far beyond a simple description of services:

1. Thoughtful SLA and KPI concepts enable it to act as a management tool for efficient IT operations.
2. It serves as a reference for the agreed-upon services during operations.
3. The contract framework provides the legal basis for claims, disputes, and penalties.

The key components of a contract document are the framework agreement, the master service schedule, and the service schedules:

• Framework Agreement: The legal framework defining regulatory and supervisory requirements. It is critical to ensure regulatory standards are up-to-date, as they often apply universally to all service contracts within the company. Any deviations from these standards typically require alignment with the company’s legal and compliance functions.
• Master Service Schedule: Governs overarching operational aspects such as governance structures, general process structures, performance management elements (SLA framework, penalties), and IT security standards.
  Key considerations include:
  • Governance Models: Should include strategic, tactical, and operational levels, along with their respective points of contact.
  • Process Guidelines: Must be kept current with standards such as ITIL.
  • SLA Requirements: Serve as the foundation for meaningful penalty clauses and should reflect the criticality of individual services.
  • Reporting Structures: Provide the data basis for SLAs and enable transparent operational control.
• Service Schedules: Outline specific services and include detailed information on SLAs, penalty rules, and reporting. The level of detail in the service description determines the degree of flexibility granted to the service provider (e.g., outsourcing vs. out-tasking). Attachments to the service schedules may include operations manuals and process manuals, which are subject to separate updating processes compared to the contract documents.

Intero Consulting has extensive experience in contract revision and negotiation. Our experts are well-versed in critical topics and collaborate with provider management functions to develop best practices tailored to your organization:

• Standardized Evaluation of outsourcing contracts and outsourcing classification (material vs. non-material outsourcing).
• Support in Balancing regulatory requirements with operational implementation, ensuring future compliance with relevant regulations.
• Ensuring Usable Contracts: We design contract frameworks with practical requirements aligned to your operations.
• Extensive Experience: Years of expertise in contract negotiations, operational IT management, and conducting benchmarks.

With our long-standing experience and deep knowledge of contract design, we ensure that your contracts are not only legally sound but also optimally suited for daily IT operations.

Feel free to contact us for personalized advice on your IT contract management!