The job that a contract has to do ought to be simple, even when the suppliers have to manage lots of complexity to deliver the services.

A contract will say what responsibilities the supplier takes on, and what they will be paid for doing so. Of course there are caveats and exclusions, and assumptions, and customer provided elements, and all the usual paraphernalia of a contract, but ultimately it comes down to the question: What is one party obliged to do for the other?

The problem is writing down exactly what you want and exactly what is supposed to happen when things go wrong. We’ve talked before about contracting with suppliers to sign up to outcomes, not inputs ( here ), and last time whilst addressing target setting and performance management we said that there was a real danger that the targets used to drive behaviour could backfire, sometimes spectacularly. People chase targets, in particular if they are likely to suffer financially from not hitting them.

Last month we looked at IT outsourcing, and suggested a few rules to help navigate what in any event are tricky waters. We emphasised getting clear about the objectives and outcomes that were desired by entering into a long term contract.

As a significant industry, IT Outsourcing has also attracted a range of ancillary service providers – consultants, advisors, lawyers, and so on, who seek to protect and support their clients, as well as earn a crust. And Differentis is one such company. We are however sceptical about much of what is written, for two reasons. Firstly many pieces of advice appear to be based on anecdotes, which whilst potentially interesting (because “real” rather than “theoretical”) may simply be misleading. Business writers often lack a healthy scepticism, and their standards of evidence fall a long way short of science, and are therefore less than fully reliable.

No company does everything themselves they all buy some services and perform others. There is nothing intrinsically peculiar about IT outsourcing; what catches imagination here is the scale of the deals, the emotions concerning off-shoring, and the spectacular failure of those deals which have turned nasty.

The motivation and context for outsourcing change, as do the technical conditions which enable it. It’s also likely that the recession will make companies reconsider their position, as they become more concerned with short term cost reduction (survival being the strategic goal) and quite what the consequences of the Satyam debacle will be have yet to be seen. There are, however, no more black or white decisions when sourcing than anywhere else.