Avoid pitfalls when outsourcing (11/03)

Sometimes it just makes sense to have someone do what a business does not have the resources or the background to do itself.

Outsourcing or service-level agreements are becoming as ubiquitous as the personal computer for many businesses, says Denis Castonguay, e-business specialist for e-Sudbury.com. Unfortunately, there are many pitfalls a company can find itself caught in if not cautious.

"In its truest form, a service level agreement is an agreement to purchase a service from a service provider - someone who will take care of managing your company's computer infrastructure," says Castonguay. "Usually, what it will have is a purpose. Are we talking about the network? The hardware? It outlines the types of responsibility the company will have when managing the network."

It sounds simple enough and some agreements are as simple as someone coming in once in a while to update the system or monitor how it is running. But Castonguay is quick to point out that many agreements can also be quite detailed, outlining a number of different aspects depending on the complexity of what the company is contracting its service provider to do.

"If I have a Cadillac version of a service level agreement, it would mean everything to do with the computer is

serviced by them to the other extreme where it might deal only with a specific application," he says. "The company you outsource to, they're going to need to know what your needs are. The agreement outlines what those needs are and will outline how you measure performance."

When it comes to managing a network, several areas have to be considered. Among them, who is responsible for dealing with changes in platform, as well as support documentation like warranties? How long should it take a service provider to respond to calls and what will be the rate of pay for changes made to things like the company's Web site or to its database?

It also has to deal with things like what to do in the event of a disaster like fire, flood, blackout, brownout or theft and who is responsible and liable for that disaster?

"Sept. 11 really brought the importance of that home for many people," says Castonguay. "In that situation, there were a lot of people who found yes, they had backups for the information they needed, but it was all stored in the same place. A service level agreement will start to define things like who stores back-up information and where do they store it? And who's responsible for it?"

There are also confidentiality issues that need to be addressed.

"You can build Fort Knox to protect a box of corn flakes, but that's overkill. You build Fort Knox to protect the gold, so you're going to put more security on your company's database than you are for the company Web site," he says. "A service level agreement will outline these issues.

"A service level agreement really outlines scope," says Castonguay. "You have to define when someone is going to be available to service the account. The question is 'what do you mean by available?' What about capacity? If you increase the size of the network, is the service provider going to be able to handle it and what process is going to be followed to deal with problems? It's not a big deal if we're talking a couple thousand dollars, but once you start getting into $20,000- to $50,000-decisions, it's going to be important the company you're dealing with to provide

the service understand what it's doing."

With all of these considerations, Castonguay says the final agreement can become thicker than some of the great works of fiction like War and Peace.

"Often it has to," he says. "It's an unfortunate fact of today's society in North America that we tend more toward contracts than we do handshakes."

Negotiation of the agreement usually takes place between a few managers of the company, including one information officer, perhaps the person who handles the accounting, or other higher-level managers. After that, usually it is preferred to have one person to serve as the front line person for working with the out-sourced agency.

Castonguay says it is also not unusual for a company to pass its agreement to a lawyer to ensure all the fine details have been addressed.

Such agreements protect both parties, he says. As a result, a means of arbitration is one of the most important parts of the service level agreement.