How to build a smarter IT contract for tariff times

It pays to be flexible.

Nate Buniva, who advises companies on contract strategy, says today’s IT agreements with service providers would be better served with some expanded adaptability. Agreements need to be written carefully to absorb sudden cost hikes—like, say, a jump in prices following a raft of new tariffs.

“Any time that there’s an economic shift or uncertainty or headlines, we find that these IT providers can, not necessarily nefariously, but can leverage that as a way to prop up a pricing conversation and say, ‘With tariffs now coming into play, our costs are going up,’” Buniva, a partner at consultancy West Monroe, told us.

“Now more than ever, it’s time to look at those contracts and see where you have bargaining power and where you don’t,” he said.

Here are some details he advises his clients to consider in new and current contracts:

• Line-item pricing transparency. Your bill shouldn’t just be for general “support,” according to Buniva, who pushes clients to understand specific costs of hardware, software, and labor. Then, you can better make the argument of whether or not a tariff directly impacts an IT service cost, Buniva said. He also often recommends inputting a “no cost passed through without documentation” clause.
• Early termination clauses based on events concerning economic uncertainty. Clients should be able to cancel an IT contract like it’s Netflix, Buniva shared in a follow-up email. “You don’t want to be locked into long-term commitments when priorities or budgets shift,” he wrote.
• Continuous-improvement clauses. Buniva has inserted written obligations where the provider agrees to an annual percentage reduction, “because they’re going to learn your environment better and be able to deliver more efficiently,” thanks to advancements in tech like AI, Buniva said.
• Location flexibility. Contracts should specify sourcing sites, Buniva told us, to help customers understand tariff impacts. A client could insert contractual language to specify that a vendor must have multiple locations to deliver services from and to purchase hardware. “You want an outsourcing partner that can offer that kind of flexibility,” Buniva wrote, following the interview.

President Trump’s announcement of “reciprocal” tariffs on April 9 included an 145% tax on Chinese imports and a minimum 10% tariff on all US imports. (Many big tech companies build their products offshore. Much of Apple’s hardware is assembled in China, for example.)

While managed service providers (MSP) frequently deliver software to customers, providers may also assist in the installation of servers or other equipment, which could be subjected to tariffs.

Service providers typically handle tariffs or focused taxes by passing them to the customer, according to Rob Enderle, IT analyst and owner of advisory firm Enderle Group, and the contracts are usually written to allow for that hand-off, because taxes are outside an MSP’s control.

IT pros, however, must be careful to not create a contract that’s unprofitable for the provider.

“You don’t want a provider that’s under stress. The quality of their services are going to decline because, as they attempt to at least get to break-even point, they’re going to be cutting things, and those things could result in that degradation of service,” Enderle said.

Buniva sees customers with leverage lately and “rock-bottom” MSP prices as providers compete for GenAI and other services.

“That potential threat of competitive pressure,” Buniva said, “that’s one of the easiest, strongest levers to pull with IT providers to get them to either give the information that you want or get a little more flexible.”