"Outsourcing in Business1OUTSOURCING IN BUSINESSStudent’s NameCourseProfessor’s NameUniversityStateDate Outsourcing in Business2Outsourcing in BusinessExecutive summary An acceptable contract is often vital to the success of IT outsourcing relationships. Thelegal agreement is a definition of the rights, liability and expectations of both the customer andvendor concerns. It is, thus, used as a stable mechanism for regulating the relationship betweenthese parties. Outsourcing arrangements are high-value commitments that last relatively longer.This essay presents a practical and systematic overview of some of the essential contractualissues involved in IT procurement, exploring and highlighting management implications whenappropriate. Matters like service level, asset transfer, pricing and payments, staffing, disputeresolution, termination, warranty and liability, and intellectual property concerns (Lee Mathew,2006, p.18). By highlighting these issues systematically from a management and operationalperspective, the bridge between theory and practice is closed. Information technology (IT) Outsourcing is subcontracting part or all the IT functions toan external vendor. The degree of hiring out varies across the spectrum ranging from one aspectto another, for instance, equipment maintenance to the wholesale outsourcing of the department. IT procurement has tremendously improved from the desire of companies to improveperformance and cut costs. Contrary to popular belief, however, outsourcing vendors andcustomers do not have similar profit motives. A tight contract can be the only mechanism thatensures the expectations of clients are met, and the critical issues to a successful hiring outrelationship achieved.B. Contractual Issues Common to most of the subleasing contracts is passing one or more IT management andoperational responsibilities from in-house to an outsourcing vendor (Lee Mathew, 2006, p.18). Outsourcing in Business3Subletting contracts involve complicated legal and business issues that are fraught with risks forboth parties. As pointed out, an outsourcing customer and vendor do not share profit motives.The written subleasing contract is hence the most important instrument that defines the liabilities,expectations and rights of each party. It is crucial that management has some understanding ofthe legal and business issues and how they should be addressed in the contracts. An outsourcingcontract involves a collection of related agreements that cover various issues like service level,asset transfer, staffing, pricing and payments, dispute resolution mechanism, termination,warranty and liability, intellectual property issues and information security. Performance Elements Service level. The service level agreement describes the precise terms, scope, types andnature of the assistance required. The times these duties will be provided and the performancelevel that is expected, for instance, turnaround time and system availability are also laid out. Theservice level agreement should make a provision for enabling the customer to measure thevendor’s contract performance by establishing regular meeting and reports. Provisions in theagreement should be made where the seller could be penalized either financially or otherwise. Inminimizing the chances of dispute (which make for added costs to the customer) these types ofagreements should be comprehensive and detailed. Transfer of assets.To allow the vendor to perform services accordingly, there are ITassets of the customers that may be transferred to the supplier. The shift is included in the saleagreement where the equipment in question is transferred formally to the vendor. These assetsundergo independent valuation. They include telecommunication equipment, software licenses,computer hardware and devices leases (Gelling Cornelia, 2007, p10). For assigning charters andcontracts from the customer to vendor, third party consent may be needed. Nonetheless, some Outsourcing in Business4arbiters refuse to give this permission without the payment of a substantial fee. A request forremuneration is common in a software license whereby the application system`s suppliers takean assignment as a new permit and demand full licensing fees. It is crucial that transfer of assetagreements ascertain cost allocation in the transposition of the needed assets. There are alsoinvisible costs that need to be taken into account in the subleasing consideration. Transfer of staff. A common characteristic of many outsourcing agreements deals withrelocating the staff from the subject company to the vendor. Labor regulations require elaborateprocedures that should be completed before the staff is moved, and the terms of services existentare guaranteed in the transposition. The subleasing vendor is obliged to take the transferredemployees and hence pay the same staff costs (Gelling Cornelia, 2007, p10). These charges havea high probability of being shifted to the company when negotiating pricing in the contract. Thenet saving in employee expenses that is expected in an outsourcing agreement is always hard torealize. When it involves complete subletting or the wholesale transfer of an in-house IT functionto a supplier, the regulations in the staff transposition mentioned apply. These ordinances,however, are not clear on whether they work in a limited outsourcing arrangement. Additionally,if the vendor takes on new staff for the contract, the customer needs to have an opinion on thepersonnel selection as this guarantees suitability and quality (Domberger Simon, FernandezPatrick & Fiebig Denzil, 2000, p. 120). It is also desirable that some team members continueservicing this arrangement. Changing these key members should not be done without priorconsultation with the customer. It is, therefore, crucial that provisions are made in theoutsourcing contract aimed at accomplishing these requirements. Pricing and payment terms. Agreement on payment terms, schedules, and pricing arecritical parts of the entire outsourcing contract considering most of these arrangements are long "