Reviewing an IT outsourcing agreement

An IT outsourcing agreement moves a function the business used to run itself, and sometimes the people who ran it, to a supplier for a term of years. The supplier's agreement covers a long relationship: how the charges change, what the service levels measure, and how the exit works. I review the agreement from the customer's side and return it marked up with a written explanation of the changes and which ones a supplier will accept, for a fixed fee of £895 in five working days.

Who this is for

Businesses in England and Wales outsourcing their service desk, infrastructure, network, application support, security operations or the whole IT function to a managed service provider or outsourcer, and want the agreement to protect the service, the staff who transfer, the data and the exit. Both parties are businesses.

What to look for in an IT outsourcing agreement

Staff who transfer and TUPE on the way in and out

Where the outsourcing moves an activity from the customer's own team to the supplier, the staff assigned to it may transfer to the supplier as a service provision change under regulation 3 of the Transfer of Undertakings (Protection of Employment) Regulations 2006, and the same may happen from the supplier to the next provider or back to the customer at the end. The customer must provide employee liability information under regulation 11 and inform and consult under regulation 13. The review checks the indemnities each way for pre-transfer liabilities, the supplier's obligation to keep records that make the exit transfer manageable, and the allocation of redundancy costs where the supplier does not want the staff.

Services, service levels and governance

The services schedule should describe the services in enough detail for the customer to say what has been missed, and the service levels should measure what matters to the business, with credits that are proportionate and an escalation to termination for persistent failure. The review checks the transition plan and the point at which the supplier takes responsibility, the governance structure, reporting, and the supplier's right to change technology, tools and delivery location, which should need consent where it affects data or security.

Charges, benchmarking and change

Outsourcing charges combine a fixed fee, volume-based charges and project rates, with indexation each year. The review checks that indexation is capped, that volumes can go down as well as up with a corresponding change to the charge, that a benchmarking right lets the customer test the charges against the market and requires the supplier to adjust, and that the change control procedure prevents the supplier treating every request as chargeable. The Late Payment of Commercial Debts (Interest) Act 1998 and the supplier's right to suspend for non-payment should be aligned so that a disputed invoice cannot stop the service.

Data protection, security and the supplier's access

The supplier will process the customer's personal data as processor and will have privileged access to every system. The agreement needs the Article 28 terms required by the UK GDPR and the Data Protection Act 2018, security standards written into the contract, a transfer mechanism under Article 46 for offshore delivery centres, breach notification periods that let the customer meet its own obligations, and controls on the supplier's personnel. Unauthorised access by the supplier's staff is an offence under section 1 of the Computer Misuse Act 1990, and the review checks the vetting, access control and audit obligations.

Step-in, business continuity and liability

The customer needs a right to step in and run the service itself or through a third party where the supplier fails, at the supplier's cost, and a business continuity and disaster recovery plan the supplier tests and reports on. The review checks the liability cap, which should be an annual cap related to the charges with a higher cap for data and confidentiality breaches, and the exclusions, which should not remove liability for the supplier's failure to perform the services at all. Where the agreement is the supplier's standard form, section 3 of the Unfair Contract Terms Act 1977 applies the reasonableness test to the exclusions.

Exit, termination assistance and the next supplier

Exit is where an outsourcing customer is weakest, because the supplier holds the knowledge, the tools and the data. The review asks for an exit plan maintained during the term, termination assistance for a stated period at stated rates, transfer of licences and assets the customer paid for, return of data in usable formats, cooperation with the incoming supplier, and continuation of the services during the exit period. It also checks the customer's termination rights for convenience, for change of control of the supplier, and for the supplier's insolvency, and notes that section 233B of the Insolvency Act 1986 limits the supplier's termination on the customer's insolvency, not the reverse.

What it costs

Complex review, £895. Heavily negotiated or unusually complex documents. Five working days.

Standard review, £495. Marked-up document and a written explanation of the changes. Three working days.

Buying online forms the engagement on payment. The scope is what the contract review page describes, you accept the Terms of Service at checkout, and I email you within four working hours to get started. If you would rather ask something first, email me.

What you get

• Your own contract returned with my amendments as tracked changes, plus a clean version with every change accepted, ready to send to the other side
• Comments in the document where a point needs explaining
• A written explanation of what I have changed and why, by email or as an attachment if it is lengthy, marking the points I would hold firm on and the ones that are negotiable
• A view on what is normal market practice and what is the other side pushing their luck
• One round of follow-up questions by email, included

What is not included

• Negotiating directly with the other side, which I quote separately once I know who is on the other side. Where the other side is willing to share a live document, I can work in that document directly
• Drafting a replacement contract from scratch
• Advice on the law of any jurisdiction other than England and Wales
• Tax, accounting or regulatory advice
• Disputes about a contract that is already signed

Questions I am often asked

Will our IT staff transfer to the supplier by law?

Those assigned to the activity that moves may transfer under TUPE as a service provision change, on their existing terms, unless the arrangements fall outside the Regulations. The review checks the agreement's treatment of the transfer, the indemnities each way, and the information and consultation obligations you must meet before the transfer date.

The supplier wants a five-year term. Is that normal?

Long terms are common because the supplier recovers transition costs over the term, and the review does not object to the term as such. It asks for termination for convenience after an initial period on payment of a defined sum, benchmarking during the term, and termination for persistent service failure and change of control.

What happens if the supplier will not cooperate when we leave?

That is what the exit clause is for, and the review makes it enforceable: an exit plan agreed during the term, termination assistance the supplier must provide at stated rates whether or not there is a dispute, and a step-in right so that you or a new supplier can take over if the incumbent stops.

Related guidance and services

• Contract review, £895, the service this page describes
• Data protection agreements and privacy terms, £795
• Employment contracts and handbooks, £595
• Reviewing a cloud hosting agreement
• Reviewing a payroll or HR outsourcing agreement

This page is general guidance for businesses in England and Wales, not advice on your own circumstances. Last reviewed: September 2026. Email geoffrey@caesar.co.uk.