The IT services market is expanding more and more, thanks to the growing demand for such services. Yet day-to-day experience in providing legal services to IT customers shows that, in practice, there is a significant problem with identifying the type of service provided by IT companies and their clients, as a consequence lawyers are forced to analyze and precise contracts that are sort of a patchwork. From the perspective of both the IT service provider and their client, it is essential to be able to differentiate between two basic services: managed service and body (team) leasing. In the terms of the scope of rights and obligations, these services are significantly distinct, which affects any eventual compensation claims for non-performance or improper performance of an obligation.

Therefore, it is advisable to have a properly drafted contract as early as the contract negotiation stage, and even earlier - when designing the service - which will precisely define the scope of the service and the consequences resulting from it. And during the negotiation process, it is important to remain vigilant so that the other party (usually the software house client) does not "pollute" the body lease agreement with provisions typical of managed service, or vice versa.

Any self-respecting software house - not only for its image's sake, but especially for the sake of the legal consequences - should be well aware of what kind of service it provides, and by allowing deviations from types of services, it exposes itself to further legal liability or unclarity of the contract's wording, which could be interpreted to its disadvantage by a court of law. In this article, we will zoom in on the differences between these two types of IT services.

Managed service

Managed service has an entirely classical character and involves the development of broadly understood software by a contractor for a client. It does not matter whether the contractor uses its personnel (which is generally the case) or subcontractors for this purpose, or whether it is the contractor personally (in consultation with its client requesting the service):

• designs the content of the service;
• estimates time and cost of its implementation;
• is responsible for the contractually established deadlines for project implementation;
• is also responsible for any defects in the delivered product (under statutory or contractual guarantee).

Obviously, when using other people in the implementation of a project (employees, b2b consultants, independent subcontractors, or contractors delegated by a third party as part of a body leasing service) the contractor is as responsible for the actions of these personnel. In comparison to the body leasing service, which we will cover in a moment, in the managed service model the contractor bears a more extensive responsibility, and from this perspective, it is a model associated with more legal and business risks.

No wonder, that clients contracting IT specialists to meet the internal needs of their IT department try to smuggle in provisions characteristic of the classic managed service model in body leasing contracts, in order to be able to later hold a contractor, providing only what they believe to be their personnel, responsible for the services provided by that personnel.

It may be in the interest of a software house to provide managed service, because by specializing in providing software, a given company strengthens its brand, has full control over the process of product development, and receives much higher payment for the provided service (because of its higher range of responsibility).

However, if the software house not only provides managed services but also offers services such as body leasing or team leasing, it should be aware of the differences between these services, securing itself properly in contracts.

Body (team) leasing

The range of duties and responsibilities is entirely dissimilar when it comes to a body leasing service, which involves providing skilled contractors (software developers, testers, DevOps, etc.) to another entity. In the case of a team leasing service, the aim of it is to provide not the individual specialists but a team of specialists, and this generally applies to bigger projects. The receiver of this service is often another software house, but also enterprises with their own IT departments that require support for specific projects.

The body leasing provider is solely responsible for providing the client with an accessible specialist with the qualifications demanded by the client. Such a person (usually referred to in contracts as a "specialist," "contractor" or a "consultant") is already performing specific tasks of an IT kind under the client's supervision, but the provider who delegated this specialist is no longer responsible for the effects of this work. This is due to the fact that the personnel provider has no control over what goes on within the project and what the specifically delegated contractor creates in this process.

Nevertheless, as mentioned above, clients using this service often have an irresistible temptation to add provisions that place responsibility on the software house for the punctuality of the project or the quality of the work performed by the delegated personnel. Therefore, it is essential to ensure that the contract for body leasing service has a classic form and the provider of this service is only responsible for:

• providing personnel with qualifications/experience in compliance with the client's requirements;
• making sure that the personnel performs the tasks at the time and location agreed beforehand with the client;
• responding to situations in which the personnel fail to provide a service and replacing it when necessary.

Contracts often include provisions about the personnel supplier's liability for the personnel's breach of rules concerning the protection of confidential information or non-competition and the transfer of copyrights, which does not go against the essence of body leasing.

So, for example, if there is any mention in a body leasing or team leasing contract of the deadlines for projects to which personnel has been assigned, it is advised to react accordingly and remove such provisions in the negotiations. If not, the software house exposes itself to greater responsibility than the very nature of the service it provides would imply.

Related articles:

IT services outsourcing

Outsourcing of IT personnel

Confidentiality protection in IT

Nearshoring vs offshoring in IT

Legal services in IT - tasks

Entrepreneur test in IT

Publication date: 13.09.2021.