IT Service Contract

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IT Service Contract

A Brief Description About the IT Service Contract

An IT service contract can also be called an IT support contract, and IT maintenance contract. Any organization that does not require a full time IT support team may consider hiring a contractor acting as an extended IT arm of the organization. The service may range from simple installation to live active support of networks and systems. It is mandatory to have the terms and conditions of such services in writing in an IT services agreement.

The service provider is also well equipped with the necessary information technology infrastructure and manpower that works for businesses requiring IT support services.  The maintenance of confidentiality of client information is a superior responsibility of the IT services provider since he has access to almost all the important IT resources of an organization.

Who Takes the IT Service Contract?

Supplier – Also called a service provider or contractor.  The supplier is generally a company with a superior pool of talent and experience. He is responsible for providing IT support to the client by engaging competent individuals in his team. He holds all the necessary licenses and certifications required to run the business. A supplier must also be equipped with ample Information Technology infrastructure to serve his clients.

Client – Who holds information technology assets that require constant monitoring, maintenance, and support.  The support requirement may not be frequent, and hence he considers outsourcing it to a supplier rather than having an in house team. He is responsible for the proper upkeep of the information technology resources in the ordinary course of business.

Purpose of IT Service Contract

The very objective of entering into such a contract is to ensure the parties to the agreement are in a clear understanding of each other’s requirements. As a first step, a service level agreement is entered between the supplier and the client. It states the level of accuracy and precision in the services to be provided, system uptime and downtime expected, confidentiality, and various other criteria the client would reasonably expect from the service provider. The service legal agreement is succeeded by the contract.  The contract expounds on the commercial aspects of the relationship.  The service level agreement acts as a background paper for assessing the deliverables of the contract.

Contents of the IT Service Contract

A standard IT service contract template contains:

  • Items Covered – The list of hardware and software with numbers and users (the hardware serial numbers and software keys if necessary) that are covered under the contract for service and maintenance.
  • Scope of Services – This includes a list of activities the service provider will undertake. It purely depends upon the requirement of the client and varies on a case to case basis. For example, checking the firewall logs can be one of the activities done by a service provider during maintenance. A list of activities with the frequency and proper explanation shall be provided. The scope is generally provided as a schedule to the main contract.
  • Type of Support – Offline and online support, where issues are raised by the client through an online ticketing system. The supplier streamlines the support into various tiers as per the complexity of the issue raised by the client.
  • Exclusions – This clause defines what is not the responsibility of the service provider. Any unauthorized usage, access, changes, natural disasters cannot hold the supplier liable under the contract.
  • Responsibilities of the Parties – The supplier/service provider shall provide the entire support system in maintaining the information technology assets of the client. The client shall extend due to cooperation and provide information as and when required.
  • Deliverables – This flows out of the service level agreement.
  • Fees – Most support agreements are entered into as an IT monthly service contract. It ensures a consistent flow of income to the supplier. The monthly fees inclusive of taxes, if any, shall be provided. The additional charges for changes or services out of the scope shall also be mentioned.
  • Duration – Normally, it is entered for a year. The contract can be extended on mutual consent.

How to Draft the IT Service Contract?

The client shall promptly explain all the expectations out of the contract in the service level agreement itself. As a professional practice, the supplier and the client shall hold discussion for imparting knowledge about the client’s IT infrastructure, people, and processes. The issues and problems that are already prevalent in the IT arm of the organization shall be presented in detail so that they are fixed at the onset.

Once the contract is signed, the relationship between the client and the service provider becomes regular and consistent. Hence the contract creates a conducive environment for the parties to the agreement to function smoothly.

Below are a few important points to be included while drafting the contract:

  • Travel allowance
  • Billing the spare parts if required
  • IT service contract pricing — Charges per hour of work done not included in the bill
  • Any extra services provided

The service level accuracy (uptime and downtime) is a critical factor of negotiation for the client. The supplier shall negotiate the rates for the range of services provided once the service level agreement is signed.  He shall maintain a log of all the support and maintenance undertaken to enable the client to assess the deliverables effectively.

Benefits and Drawbacks of IT Service Contract?

An IT service contract has the following benefits

  • The contract serves as a check to perform the services with accuracy.
  • Since the businesses of the two organizations are at stake, people work with caution.
  • The IT service contract proves to be a cost-effective solution for small and medium-sized companies who cannot afford to have an in-house support team.

The drawbacks of the contract are

  • The confidentiality of client information becomes a serious problem with respect to such a contract. The parties to the agreement cannot reasonably judge who or what becomes a threat to the protection of sensitive data.
  • The client has to depend on the service provider even for the smallest updates or changes, which may impact productivity.
  • It is very difficult for the client to find a new supplier in case of termination of the contract, as everything will start from scratch.

What Happens in Case of Violation?

Violation of the contract can happen when there is a breach in the confidentiality of the client’s information(1).  The client would like to immediately restrict the access offered to the service provider and terminate the agreement. He would also consider filing a legal suit depending upon the sensitivity of the information.

The violation can also happen when the supplier is not able to achieve the desired service level. The client would generally give a timeline for improving the performance. The supplier has to prove his mettle else the contract would be terminated. The supplier is expected to maintain a detailed record or log of all the services provided by him to the client.

An IT service agreement is always unique and demands a lot of details with respect to the nature of services provided to avoid misinterpretation by the parties to the agreement. An IT service contract sample shall provide the basics of drafting the contract. However, caution should be observed while drafting the nature and scope of services as it differs from each client.