Establishing Forward-Looking Change Processes: Mastering IT Contract Management - Part 3

For any IT agreement, whether for software-as-a-service, managed IT services, or a software implementation project, contract signing is just the beginning. Maintaining a successful relationship between the customer and the service provider depends on how the IT agreement is managed throughout its lifecycle.

Mastering IT Contract Management: A Five-Part Series outlines how organizations can ensure they realize the value anticipated from their IT agreements—and avoid the many pitfalls along the way.

Almost inevitably, over the course of an IT agreement, business needs will evolve, technology shifts will occur, and unforeseen challenges will arise. As a result, a well-designed change process is critical to ensuring an IT agreement remains workable and relevant over time. Some of the most common pitfalls in managing the change process include:

• Overwhelming Volume of Change Orders and Amendments: Whereas change orders typically address discrete scope or cost adjustments (e.g., extending a project deadline or adding new users), amendments are best for revising broader structural or legal terms. When either change orders or amendments are poorly drafted, inconsistently referenced, or issued too frequently, they can undermine the clarity and enforceability of the original agreement. For example, a customer might issue multiple overlapping change orders without referencing the relevant contract sections, creating confusion over how the contract has been amended.
• Rigid Change Approval Processes: Change mechanisms that require multiple layers of formal approval—especially for minor changes—can stall progress for IT projects or operations for ongoing services. For instance, requiring VP-level signoff for an internal resource reassignment may delay resolution and disrupt timelines, particularly during fast-moving IT implementation projects.
• Lack of Provisions for External-Driven Changes: Some IT agreements do not account for changes prompted by regulatory changes or urgent security needs. Without a streamlined process for ensuring externally required changes are implemented, customers risk falling out of compliance or delaying critical protections.
• Service Provider Veto Power: IT agreements that allow the service provider to unilaterally reject requested changes can result in the customer’s critical business needs going unmet, which can be especially problematic when the customer is “locked-in” with the service provider. 

To avoid these challenges and keep change processes efficient and enforceable, organizations should consider the following approaches:

• Drafting with Flexibility in Mind: To guard against the risk of an overwhelming volume of change orders, it is important to avoid being overly prescriptive and/or including operational details in the agreement which may change over time. For example, in the context of an IT agreement for back-end services, instead of listing the specific tools the service provider anticipates employing, or the specific steps the service providers will take to accomplish a specific task, which are likely to change over the course of the agreement, the parties could instead focus on the expected outcomes of those tools or process which are less likely to change, and avoid a change order.
• Standardizing and Simplifying Change Orders: Including a form of change order as part of an IT agreement, can help ensure change orders align with the structure of the agreement and make the change process easier to follow. For more complex IT agreements, customers can make the change orders even more straightforward by including a section in a contract management manual on how to initiate changes, review changes, approve changes, allocate roles and responsibilities, set criteria for significant changes, and outline requirements for documentation.
• Using a Tiered Approach for Approval: Customers should consider whether different types of changes should require more or less formality to implement. For example, while it may be appropriate for an ordinary course change with no impact on fees to be subject to a less robust approval process, changes impacting scope, cost and/or timelines, should likely be robustly documented in a change order. Creating different channels for review and approval of changes based on risk helps ensure agility without sacrificing oversight.
• Pre-Negotiating Fees for Anticipated Changes: If certain types of changes are anticipated at the outset of an IT agreement – such as increases in the number of users of a particular type of software, or additional platform integrations – it is advisable to negotiate the fees or mechanism for determining fees for such changes upfront to avoid drawn out change order negotiations later on when negotiations leverage has shifted.
• Building in a Process for Externally Driven Changes: Include provisions in the agreement that allow for prioritized handling (and implementation) of changes that result from regulatory or other externally driven changes, and pre-determine who will bear the costs for such changes. For example, service providers typically are expected to bear the costs of general changes in law that apply to all businesses (e.g., like changes to data protection laws).

The next part in Mastering IT Contract Management: A Five-Part Series will cover how to prepare for smooth renewal, expiration and termination of IT agreements.

McCarthy’s Technology Group has extensive regional and national experience advising and representing both customers and service providers in the IT space. Visit our Technology Group page and contact us with any questions or for assistance.