The art of contract negotiation
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Speaking at Information Age's Hosting & Managed Services conference, Kemp & Little LLP partner Mike Conradi explained the best way to negotiate a contract with a supplier
The legal specifications of a managed service engagement can have as much if not more of an influence on its success as its technological characteristics, as Mike Conradi, partner at technology law firm Kemp Little, explained at Information Age's Hosting & Managed Services event.
Conradi advised that when procuring a managed hosting service, buyers should separate contracts into pre-service and actual service provision agreements, which reduces the possibility that unexpected costs might arise after the due diligence process is complete. “If you've got the time and energy to do it, you'll get a better deal,” he explained
He also strongly recommended that buyers plan their exit strategy before signing any contract. “You have to think about exit management right at the beginning," he warned. “Your supplier should be asked to produce an exit management plan and a procedures manual so that if the contract has to end early, it will be easier for you to move somewhere else.” These, Conradi added, should be updated over time to correspond with any other changes in the service level agreement (SLA).
He also warned against including ‘vague’ service level targets in contracts, advising buyers to make SLA metrics are meaningful and measurable instead. "You can have an SLA that says there will be a survey of key staff every three months and they will be asked to rank the service on a scale of one to ten and the supplier will get a mark of at least eight,” he said.
It is equally important to ensure that the supplier’s performance against the SLAs is tied to meaningful outcomes. “The key negotiation point is the consequence of a report finding that says you're supplier is not good quality – do you get a price reduction, can you terminate?”
To close, he reminded delegates that while SLAs were important, they do not by themselves define the value of the service provided thereafter. “It's not just about the contract,” he concluded. “It's also about the relationship afterwards and how you achieve that”.
