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IT Transition Services Agreements (TSAs) Best Practices

M&A Technology

June 1, 2023

1. Service Identification & Scope Definition

1.1 Core IT Services

  • Inventory all IT services to be included in the TSA, detailing their current operational state and criticality to business functions.
  • Establish the service quality metrics and performance expectations for each service, using clear, objective, and measurable key performance indicators (KPIs).
  • Delineate clear boundaries of responsibilities between the provider and the receiver of the services.

1.2 Ancillary Services

  • Identify the need for ancillary services, such as training, support, and consultancy, and specify them in the agreement.
  • Clearly define the scope and extent of these additional services to avoid misunderstandings.
  • Establish the expectations for these services, including delivery timelines, quality, and cost.

2. Contractual Terms & Conditions

2.1 Duration & Exit

  • Establish the term of the TSA, ensuring sufficient time for the receiver to transition to independent operation.
  • Define clear exit strategies and termination conditions for both parties.
  • Include provisions for extension in the event of unforeseen delays.

2.2 Pricing & Payment Structure

  • Detail the pricing model, making sure it is comprehensive and includes all cost components.
  • Set out clear payment terms and conditions, including the timing, method, and currency of payment.
  • Consider potential price adjustment mechanisms for changes in volume, market conditions, or service levels.

2.3 Confidentiality & Data Security

  • Ensure the TSA contains strong confidentiality clauses to protect sensitive data.
  • Define the data security requirements and the measures to be taken to ensure compliance with these requirements.
  • Address the responsibilities and liabilities for any data breaches or violations of data protection laws.

3. Execution, Management & Review

3.1 Service Level Agreements (SLAs)

  • Define clear SLAs for each IT service, with measurable performance metrics.
  • Establish a mechanism for monitoring and reporting on service levels.
  • Define penalties or compensations for non-compliance with SLAs.

3.2 Governance Structure

  • Establish a governance structure with roles and responsibilities for managing the TSA.
  • Include mechanisms for addressing and resolving service performance issues.
  • Define a regular review process to assess the effectiveness of the TSA and to make necessary adjustments.

3.3 Dispute Resolution

  • Define a clear process for dispute resolution, with escalation procedures and timeframes.
  • Consider including mediation or arbitration clauses to avoid litigation.
  • Ensure that the dispute resolution mechanism is fair, transparent, and efficient.
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