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Common Outsourced IT Contracts Decoded - IT Untangled

You’ve interviewed a couple of IT companies, and now you're ready to pick a service provider. Congratulations on narrowing your search to a top 3, but now what?

Staring at the contracts, they all look similar. And not just similar, but downright identical in some parts. So, how do you choose? Which is the best option for you? How do you really tell the difference between the contract options? Which one will be the best investment for your future?

Before we spin too far out of scope, let’s take a step back. There is a lingo to outsourced IT contracts. Let’s not leave this to chance and decode your contract options. Let’s truly get to the bottom of finding a perfect match for your business and your budget.

Types of IT Support Contracts and Their Definitions

Contracts are hard to read for everyone. You are not alone in this, especially when making a side-by-side comparison. To the untrained eye, they look the same. Let’s start by decoding the kinds of IT contracts that exist.

Pay-As-You-Go (Hourly) / On-Demand / Break-Fix / Time & Materials (T&M)

This kind of service goes by many names: Pay-As-You-Go, On-demand, Break-Fix, or Time & Materials (T&M). Basically, it's a “you broke it, we fix it” arrangement.

In person or over the phone, your service provider will try to gather enough information to give you an estimated cost on a per-project basis. Their goal is to fix or find a solution to your need or problem. This type of contract comes with a flat fee of per-hour payment -- typically running you between $150-250 an hour -- plus the cost of parts.

Block Time

Consider this your prepaid version. You pay up-front for a “block of time,” and as you use the services, the block decreases. In the contract agreement, a block of time is defined and paid for in advance at a price that was agreed upon. The customer can call for assistance for any issue, and the service provider will work on it. Once the block of time has been used, an extra fee is charged for additional services. Usually, the fee is the basic pay-as-you-go hourly rate.

When considering this type of contract, be aware of whether or not onsite help is part of the package.

Managed IT Services

This arrangement means your provider takes on the role(s) of your IT department or acts as an extension of your in-house IT personnel.

There are two different kinds of managed IT services agreements:

  • All-Inclusive – this may look like apples-to-apples, but every IT company’s definition of “all-inclusive” is different. Some include software licensing in the per-user price while some charge that on top. It’s important that you know exactly what they cover under each circumstance.
  • Partial Outsourcing – the IT company takes care of certain things like monitoring and backups. Again, make sure that the list of what they take care of is set in stone, and you understand it completely.

Take some time to read and understand the benefits of the different kinds of IT contracts. Evaluate the contracts in hand, while reflecting on what you are looking for. For example, don’t sign up for pay-as-you-go if you were really looking for all-inclusive. Be aware of your options and don’t be afraid to ask for a different contract.

🔎 Related: Managed IT Services Cost & Pricing Guide for Southern California Businesses

IT Contract Add-ins


Monitoring is exactly what it sounds like. Your service provider will monitor your devices, network, and services. The monitoring system is crucial because it’s how they will gather information to care for your system properly. This is their main source of real-time information. Much like a fire alarm senses smoke, the monitoring system will detect issues.

Is your server being over-strained, has service stopped working, or has a workstation been infected? Monitoring detects those things, plus day-to-day things like maintenance or hardware updates.

What kind of monitoring does the contract say it does? What happens when they find an issue? Are the work issues they discover covered by your contract or billed separately? How do they handle escalated situations?

Ask as many questions as you can think of when comparing -- the devil is most definitely in the details.

Backup Management

If they don’t offer this in the contract, take it as a sign that you don’t want to work with them, or send it back and ask them to include it. This should be a part of your outsourced contract because backups save companies, period.

Having your IT service team manage backups will guarantee that they will be available when you need them. They will also make sure that the backups are being done on a regular basis along with testing to make sure they can recover the data if/when it's needed.

The good news is that there are multiple backup solutions to fit your needs and budget. Make sure that your contract details exactly which kind of backup you'll be getting. Make sure that system fits your company’s needs. If you are unsure ask about other options, be sure to voice your concerns. Service providers can find many solutions for you if you communicate your needs.

Proactive System Maintenance

Proactive system maintenance goes beyond regular maintenance, such as running disk defrags, Windows updates, and checking to make sure endpoint detection and response (EDR) is deployed. 

What makes proactive system maintenance so important is that its whole job is to catch issues before they become bigger issues -- a.k.a. avoiding downtime. This process is done in the background on the backend, and you as a customer will not be affected by it. But it is a vital part of service and is one of the main reasons your system will run smoothly.

Make sure that this is included in your contract to avoid downtime.

Ask Questions About Their Processes

The biggest thing is to ask IT companies questions about their processes. All of them say “strategy” but what does that mean? They all say “backup management” but what will they be doing and how frequently? And ask questions about what involvement you’ll need to have so they can get the job done.

Here is a quick list of questions you should know the answers to before signing a contract:

  • What does the contract cover? - Example: Maintenance, onsite, help desk, after-hours support, etc.
  • What is the process for regular maintenance, onsite support, escalated help desk issues, after-hours support, onboarding, etc.?
  • What is the extra cost of the items that are not covered in the contract?
  • What kind of support can I expect? - Example: Response time for calls, emails, and fixing issues?
  • How long will the integration/onboarding process take?
  • Can their service support your company’s growth? Can they scale with your business if need be?
  • What results can I expect?
  • What is the process for early contract termination?

There is a lot to say about going with your gut instinct, but some more information about what you're signing up for is always helpful. Make sure that you feel 100% confident in your IT service provider and the contract before you sign it. ASK EVERY QUESTION. There are no wrong or “dumb” questions, and a great service provider will be more than willing to help you understand.

🔎 Related: Outsourced IT Support: A Small Business’s Guide to IT Solutions

IT Untangled

IT can be complicated. We're here to help "untangle" it for you.

IT Untangled aims to provide clarity on IT topics for business people. This weekly blog series will explain and discuss the complex world of IT, in words you understand.

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