Sometimes companies in a hurry to start their outsourcing go ahead without completing the tedious and time consuming task of drawing up a contract first. They very often sketch a memorandum of intent at face value.

Although such a document may help to generally establish what both of the concerned parties are expecting of each other an actual legal contract is what one really needs to have. No matter how much an outsourcer would like to regard the vendor as a partner rather than an employee and no matter how bright the prospects for a future relationship may be an original contract will help to establish the relationship with its parameters more firmly.

Besides this, you might ultimately wind up spending as much time and effort preparing your memorandum as you would have drawing up an actual agreement!

A contract will be more specific on the finer points, will be interpreted more accurately by various executives and will help to strengthen the client-vendor liaison.

It will allow both, the vendor as well as the client to have a clear picture of what the hazards, returns and the benefits may be for them and for each other, which will make the relationship more transparent and more workable.

A balanced and flexible contract will withstand any foreseeable changes that are bound to occur in technology and the marketplace during the tenure of an outsource and will form an excellent foundation upon which to develop a robust and prolonged outsource relationship.
Both parties must also be prepared for the eventuality of disengagement. An informal memorandum will in all possibility not include the terms for disengaging whereas a legal contract will, thus saving each party a lot of time in court and a lot of money should such a situation arise.