The newer IT contracts involving higher levels of automation and New-Age digital components like cloud, analytics, and artificial intelligence, often get service providers better prices, but they also come with more stringent liability clauses.
This is because the work either impacts the front-end operations of clients, and hence the overall business — or they are aligned to delivering specific outcomes. Traditional IT contracts were based on the time-&-material model, under which clients simply paid for the number of hours spent on delivering a project.
Rahul Barwe, a senior analyst with IT research firm Everest Group, says a global consumer goods company’s outsourced robotic process automation (RPA) solution malfunctioned. “It took six months for the base product to be updated and fixed. The company could not recoup the lost opportunity costs from the service provider because such a scenario was not adequately incorporated into the contract terms and conditions,” he says.