Running a business can require a significant spend on IT, and typically, almost all that spend will occur via contracts with the selected suppliers, often using the suppliers’ contracts.
These contracts may be arranged and owned by parts of the business other than IT, but for contract management purposes they are usually still considered as ‘IT contracts’.
Establishing and managing IT contracts effectively generally requires specific expertise in two separate but related areas:
1. Subject matter knowledge
The majority of IT-related spend is typically for equipment, software, data networks, fixed and mobile telephony, internet access, data centres, consulting, and a wide range of general and specialist services relevant to the business.
Within each of these spend categories there can be many sub-categories, each with similar and/or different characteristics, warranties, support requirements, service levels and so on. For example, the following represents just a few sub-categories of equipment:
- Personal computers
- Disk storage
- Uninterruptable power supplies
- Wireless access points
- Satellite dishes
In-depth subject matter expertise is required to ensure that the applicable contract, including any schedules:
- Accurately specifies the products / services to be provided
- Is based on assumptions that are technically realistic and do not negate any obligations the supplier needs to comply with
- Contains terms and conditions relating to the products / services that are technically relevant, reasonable and achievable, and are not administratively or operationally burdensome
- Defines supplier service performance levels that meet timeliness and criticality requirements
- Provides support services at times appropriate for business needs, and with response times based on issue severity
2. Technical jargon
Just as the legal community writes contracts using legalese, the IT community uses the technical jargon of each spend sub-category as a compact and precise way to express concepts, measures, outputs, capabilities and so on.
This jargon can be to a Contracts Manager as legalese can be to a technical person.
Some elements of jargon can be common across sub-categories, but many are specific to only a single sub-category. For example, ‘PPM’ (pages per minute) is applicable to printers and photocopiers, while ‘VSAT’ (Very Small Aperture Terminal, an antenna that is typically less than 3 meters in diameter) is applicable to satellite communications.
It is neither reasonable nor expected that a Contracts Manager should be a subject matter expert about all or any areas of IT, or be fluent in technical jargon. This is more properly the role of the technical people.
Practically speaking however, it makes good sense for a Contracts Manager to gain familiarity in both areas over time, because managing IT contracts will nearly always require strong interaction between a Contract Manager and various contract stakeholders, especially the technical people.
The Contract Manager can provide stakeholders with plain language interpretations of contract legalese, and point out contract terms or conditions that the stakeholders need to be aware of from an operational viewpoint. For example, the contract may specify the level or type of encryption to be used on documents passed between the parties.
The stakeholders can provide the Contract Manager with subject matter expertise, translation of technical jargon into plain language, and advice about any contract terms or conditions that are irrelevant or unable to be complied with from an operational viewpoint. For example, the technical people may advise that the level or type of document encryption specified in the contract does not meet internal standards and will not be used.
The knowledge transfer between Contracts Managers and stakeholders increases issue awareness across the board, simplifies and shortens communication, and increases trust and confidence in each other, allowing more people to contribute more effectively to the contract management processes.
The value of the plain language summary
Previous articles have highlighted the importance of the Contracts Manager preparing a plain language summary of each contract. This not only gives the stakeholders a head start on understanding the contract, it also eases the burden on the Contracts Manager to repeat the same details in person for every new stakeholder.
The contract summary can be particularly useful for software contracts, some of which contain many traps for the inexperienced and unwary.
Large organisations often have their own software asset management teams who can act as subject matter experts for contract management activities.
This area can be so complex that a whole software asset management industry with its own software applications has developed to help understanding and management of software usage.
Notwithstanding the availability of such applications, the value of the contract summary for some software contracts lies in the exposure of software usage rules, obligations and constraints that may apply, such as:
- The software may only be used on a single PC, on a network in a single location, or within the country where it was purchased
- The software may not be used by anyone not employed by the organisation that obtained the software, by any subsidiary or joint venture of a legal entity that obtained the software where ownership is less than a specific percentage, by a national of specific countries, by more people than the number of copies obtained, unless it was obtained with software support or is used in conjunction with other software
- The software may not be run on CPU processors with a certain number of cores or in conjunction with certain other software
- The software cannot be resold, exported to certain countries, used to offer commercial hosting services to third parties, reassigned to another person or device within a designated period from last being assigned, or separated into individual components when obtained as a bundle of components
Nearly every software contract contains some of these rules, many contain even more.
As an example, Microsoft's June 2018 Product Terms document has 112 pages of usage rules covering every piece of software they publish.
Promoting awareness of such conditions and obligations surrounding software usage is crucial for minimising risk.
As you can see, the complexity and variety of IT contracts make them a significant challenge from a management perspective. Key to meeting that challenge is to bring good contract management disciplines together with specialist IT knowledge.
It's rare for this to be simply one person in your organisation due to the breadth of IT subject matter. However, over time an adept Contract Manager can build up sufficient experience to add value in this area and bypass the need for IT involvement in some cases.
That said, the pace of change in IT will always ensure that there are new areas emerging where experience will be in short supply. This means that a non-specialist Contract Manager will always need to lean on IT in some capacity.
IT teams need to recognise this and embrace the process of contract management to ensure they generate the expected benefits from their contracts.
For more advice on the contract management disciplines required, you can download our Free Contract Management Ebook via the following link:
You can also read our related articles: