XaaS and Xshoring Contracts

[deanwebb]

We've heard of SaaS, IaaS, and tons of other things that start with a capital letter and end in aaS. There are vendors everywhere, ready to take a task that firms used to have to do 100% in-house and then do it for them, all at a price that saves money overall, so the marketing goes. In addition to XaaS, there's also all manner of Xshoring and Xsourcing models to handle skills shortages in various departments, including but not limited to IT, legal, payroll, and HR.

For a small business, these things make sense. I may be a clever salesman with a programming buddy, and we want to change the way the world does {$STRING_THING_WORLD_DOES}, not deal with tax codes or hire yet another level 1 desktop support guy. Go to a service provider and I can basically pay only for the hours I need, not a full-time employee. That's a huge savings, and we can learn to work our schedule so that we can try to have our peak time away from other peoples' peak times so that we don't pay peak time price spikes in the form of expedition fees or just waiting for our person to clear through a backlog to get to our work.

Ah, the best laid plans of mice an men... this is another one of those. We can never plan surprises, emergencies, or crises. Those arise and then the true test of the outside vendor arrives... or the true test of the contract arrives.

Those tests may arrive sooner in the medium and large business when what they're used to doing collides head-on with the clause in the contract that they didn't realize was going to keep them from doing what they're used to doing.

Example 1: Firm A contracted with Vendor Z about handling all its email services. Firm A got what it thought was a great price, a huge savings over doing it all in-house. No more email admins complaining about failed backups of public folders while drawing massive salaries... ah, the major shareholders are already looking through champagne catalogs, readying for the celebrations to come!

Hold on, our administrative assistants are saying that they can no longer share calendars with their executives. All of them are having that issue, so it could be system-wide. This will be an excellent test of how our vendor holds to the SLAs it's defined.

Firm A calls Vendor Z: "Hello, please fix the calendars. We can't share them."

Vendor Z replies: "That's correct, you can't share them."

Firm A: "Right, so fix them."

Vendor Z: "We can't do that."

Can't do that? Firm A is preparing an invoice for all the SLA breaches that are about to happen! Charge this vendor for each admin assistant! Make them rue the day they were brash enough to promise email services so boldly and fail to provide even the most basic of calendaring services on this, day one of the new contract!

But Vendor Z finishes its statements: "We can't do that because we only provide email services. Calendaring services are a separate option."

Poof! Firm A's righteous indignation vanishes in a puff of blue logic. Now, instead of demanding, it is begging. It checks the contract - what else usually goes along with email but isn't strictly email, now that we are legally required to think about that? Now that we have a list we should have generated before talking with Vendor Z, what are Vendor Z's rates for those services? YE GODS, THOSE ARE LARGE NUMBERS! Can we negotiate them down, like we did to get rock-bottom prices on email services?

Quoth Vendor Z: "Nay, nay."

Cancel the contract on this, day one of the new services? Unthinkable. We still haven't decommissioned the old email servers, but we have decommissioned the old email admin. He's been terminated, and he wasn't too happy about it. If we bring him back, we'll likely regret that to our dying days. Besides, we have no cause to cancel... they are providing email services (if only that), and they'll fight in court to be able to keep every penny of what we owe them...

And so, Firm A pays Vendor Z every penny what it owes and then pays many, many more pennies for all the add-on services as it moves from the Bronze plan to the Silver, then the Gold, then the Platinum, then the {$STRING_UNUSUAL_METAL_THAT_COMES_AFTER_PLATINUM} and so on.

"What about shared inboxes?"
"That's not available at the Vanadium plan."
"What, we have to buy into the Molybdenum plan?"
"Looks that way, Firm A."

And so, after panicked negotiations, by day 2 of the new contract, Firm A is on the Molybdenum plan and is paying about 25% more for what it used to cost to do email.

Example 2: Firm B has Vendor Y handle its networking needs. All of them. From the switchport to the MPLS cloud, Vendor Y handles everything. All that Firm B has for networkers are managers that pick up the phone when there's a problem and then hang up the phone when Vendor Y says it's fixed.

Firm B isn't saving money anymore, because Vendor Y has the same scheme as Vendor Z: if a firm wants a service that wasn't already negotiated, it will have a prohibitive cost to add that to the contract. Worse, Vendor Y now owns all the charts, diagrams, and everything else that shows how the network is set up. If Firm B wanted to take networking back in-house, it would have to regenerate all those materials on its own, unless it wanted to pay another king's ransom to Vendor Y.

And Firm B has no say in how Vendor Y runs its business. Vendor Y just runs its business. Does Vendor Y use proper security when connecting to network gear, or is it using a shared account over telnet? Does Vendor Y orchestrate all code pushes with clever software distribution techniques, or does it hire thousands of people in Himynamistan, where the labor is cheap, to do it all manually, with all the potential such methods have for tpying erorors and copy ancopy and paste mistakes.d paste mistakes. copy and paste mistakes.

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Those are but two examples of the pitfalls that await on the other side of the XaaS contract. I'm curious about what other examples the folks here might know about. Keep the examples free of naming names or giving away specific information, as I've done, but do keep in the "gotchas" that show up after the contracts are signed.