The Paradox of SLA’s in Trusted Relationships

Posted: 07/27/2015

Ed Hansen, Partner at McCarter & English, exposes the divergent issues underlying outsourcing agreements

The reason Service Level Agreements exist within contracted services is because, fundamentally, the economics of the deal don't support partnerships. In reality, outsourcing is where two different parties, with divergent interests, come together for the "common good", explains Hansen.

A more interesting approach to building a partnership is to start with the fee schedule: How can you align fees with deriving the "right" behaviors for the parties? This approach naturally aligns interests, instead of penalizing each other. Hansen cites the example of moving the "cost" of the infrastructure over to the vendor, and then utility-pricing the service they provide – which works in some circumstances.

Find out more in this interview.

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