Driftwood: All right. It says the, uh, “The first part of the party of the first part shall be known in this contract as the first part of the party of the first part shall be known in this contract” – look, why should we quarrel about a thing like this? We’ll take it right out, eh?
Fiorello: Yeah, it’s a too long, anyhow. (They both tear off the tops of their contracts.) Now, what do we got left?
Driftwood: Well, I got about a foot and a half.

After talking with people from companies whose experiences with their outsourcing‍ contracts can be best described as “disappointing”, I wonder if they didn’t have the equivalent of the‍ Marx Brothers‍ representing them in their contract negotiations. I’m not saying that the corporate lawyers were idiots‍ , just that they may have been outclassed by the outsourcers’ lawyers. This is a specialized situation, after all.

Like the company doing the outsourcing, the outsourcer wants to maximize profits. Outsourcers are not charitable organizations, offering up low-cost business services to help the hapless firm with IT‍ needs. They want to get paid, Jack! Some may want a long-term, quality relationship with a client, but there are plenty out there that want to sign a contract that, on the surface, looks like it will reduce costs, but it contains hidden standard business practices‍ that will rake the clients over the coals.

One of the biggest gotchas in an outsourcing contract is the fact that the relationship between a company and its IT is no longer one of company to employee, but company to contractually provided service. That means the “one more thing” that managers like to ask for from their employees isn’t an automatic wish that will be granted. Did the contract authorize that one more thing? No? Well, that will cost extra, possibly a lot extra.

Another loss is the ability to say, “I know that’s what I wrote, but what I meant was…” as a preface to correcting a requested change. In-house staff can be more flexible and adapt to the refinement of the request. Outsourced staff? Well, it seems as though the staff were engaged to make a specific change, so there’s a charge for that, even though you decided to cancel the change in the middle of it. Now, the change you requested needs to be defined, submitted, and approved in order for us to arrange staff for the next change window…

There’s also the limit on the time-honored technique of troubleshooting the failed change and then making the troubleshooting part of the change. Consider a firewall change and then discovering that the vendor documentation left out a port needed for the application to work. In-house staff have no problem with adding that port and making things work. Outsourcers? If that change isn’t in writing, forget about it until it is. And, then, it may be a matter of rolling back the change and trying again, come the next change window.

Speaking of firewalls, that brings me to the “per line of code” charge. If the contract pays by the line of code, prepare for some bulky code if the contract does not explicitly state that lines of code must be consolidated whenever possible in order to be considered valid and, therefore, billable. Let me illustrate with an example.

My daughter is 14 and has zero experience with firewall rules. I asked her recently how many rules would be needed for two sources to speak to two destinations over five ports. She said five rules would be needed. I then gave a hint that the firewall help file said that ports could be grouped. Then, she proudly said, “one!”

While that’s the right answer for in-house IT staff, it’s the wrong answer for an outsourcer being paid by the line. 20 is the right answer in that case. It blew her mind when I told her how many different firms I’ve heard about that had 20 rules where one would do. As a teenager with a well-developed sense of justice, she was outraged. So long as contracts are signed that don’t specify when, how, and what to consolidate, she will continue to be outraged.

I didn’t have the heart to tell her about how some outsourcers contract to provide services like email, but the contract did not outline all the things we take for granted as part of email but which, technically, are not email. Shared calendars? Not email. Permissions for an admin assistant to open a boss’ Inbox? Not email. Spam filtering? Not email. Email is the mail server sending/receiving to other mail servers and allowing clients to access their own inboxes. Everything else is not email, according to the outsourcers’ interpretation of the contract. Email is just one example, and all the other assumptions made about all the other services add up with the above to create a situation in which the outsourcing costs significantly more than keeping the work in-house.

This can have significant impact on security. Is the outsourcer obligated to upgrade devices for security patching? Is the outsourcer obligated to tune security devices to run optimally? Is the outsourcer required to not use code libraries with security vulnerabilities? If the contract does not specify, then there is zero obligation. Worse, if the contract is a NoOps‍ affair in which the customer has zero visibility into devices or code, then the customer may never know which things need what vulnerabilities mitigated. There may be a hurried, post-signing negotiation of a new section about getting read rights on the firm’s own devices and code… and that’s going to come at a cost.

Another security angle: who owns the intellectual property in the outsourcing arrangement? Don’t make an assumption, read that contract! If the outsourcer owns the architecture and design, your firm may be in for a rough ride should it ever desire to terminate the contract or let it expire without renewing it.

I’m not even considering the quality of work done by the outsourcer or the potential for insider threat – those can be equal concerns for some in-house staff. The key here is that the contract is harsh, literal, and legally binding. That means vague instructions can have disastrous results. Tell an outsourcer to “make a peanut butter and jelly sandwich,” do not be surprised if the outsourcer rips open a bag of bread, smashes open the jars of peanut butter and jelly, mashes the masses of PB & J together, shoves the bread into that mass, and then pulls out the bread slices with a glob of peanut butter, jelly, glass, and plastic between them. He gave you what you specified: it’s not his fault that the instructions were vague.

There can be a place for oursourcing, particularly as a staffing solution for entry-level positions with high turnover. But every time I talk with someone from a place that either is currently in or is recovering from an outsourcing contract that went too far, I hear the horror stories. The outsourcers’ lawyers know what they’re doing and the firm’s lawyers fail to realize how specific they have to be with the contract language to keep from looking like they may as well have been the Marx Brothers‍.

Driftwood (offering his pen to sign the contract): Now just, uh, just you put your name right down there and then the deal is, uh, legal.
Fiorello: I forgot to tell you. I can’t write.
Driftwood: Well, that’s all right, there’s no ink in the pen anyhow. But listen, it’s a contract, isn’t it?
Fiorello: Oh sure.
Driftwood: We got a contract…
Fiorello: You bet.