Enterprise Infrastructure Management Is Not a Part-Time Job

by Pillsbury’s Social Media & Games Law Blog

We recently completed a major renegotiation of a very large, longstanding infrastructure outsourcing contract. As is typical with renegotiations, there were areas of the contract that required changes and areas the client wanted to leave alone. In this case, scope (and the presumed current solution) was to be left alone as the focus of concern was thought to be on other areas of the relationship. However, the need to update a seemingly simple exhibit - the Key Supplier Personnel list - told the client they had reason to be a lot more concerned about the supplier's current solution.

Like most IT outsourcing contracts, this one had the typical provisions around Key Supplier Personnel (KSP) (e.g., full-time, employees of the supplier, rules about replacing the KSP, commitments to tenure on the account, etc.). When asked to update the KSP exhibit, the supplier came back with three names - the Account Executive, Deputy Account Executive and the Business Manager (yep, the person in charge of billing the client). That was it. Not a single person with technical knowledge of the client's critical systems or technologies. Nobody involved with actually running the client's IT environment on a day-to-day basis.

Since this was an ongoing relationship, we asked the client to come up with a KSP list following some best practice guidance from us. The client came up with a list of ten positions. (Not surprisingly, the Business Manager was not on the list.) When we sat down with the supplier to review the list they informed us that well over half of the individuals listed by the client were not eligible to be designated KSP. As it turned out, most of the supplier's resources that the client felt were the most critical to the future success of the account were either not dedicated full-time (or even designated) to the client's account or were contractors (not sub-contractors, but 1099 type contractors).

The use of pooled or designated resources is a long standing practice in infrastructure outsourcing and in many cases makes a lot of sense. Monitoring and initial event detection are good examples of where pooled resources are appropriate. Designated resources make sense when resources can be assigned two or more clients because full time resources would be more than is needed and the flow of work can be balanced between clients.

Unfortunately, this client is not the first to be surprised to discover critical members of their delivery team only work "part-time" on their account. Senior subject matter experts and hands on delivery leaders, who in the past would be dedicated, full-time employees are now often just partial resources whose hours are "bought" by the account team. And of course the account team is incented to buy as few resources as possible.

Suppliers who use this model like to point out that the contract has SLAs and the client shouldn't care what the solution is. That is complete nonsense. There is a lot more to operational delivery than simply meeting SLA's and a poorly designed solution will increase delivery risk. Suppliers may get lucky - infrastructure doesn't break that often. But when it does you don't want to find out then that your critical SME is working on another account or just got a better 1099 gig someplace else.

How do you avoid being surprised by the Suppliers solution erosion?  We will pick that up next week in "Scope v Solution".


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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