an outsourcing agreement is a contract formed between a company and a service provider wherein the provider promises to deliver specified services. an example would be data processing from a service provider that utilizes its own staff and equipment, typically working from their own location as well. these tasks are among the most commonly outsourced: it’s a smart idea to sit down and work on developing a clear definition of what is to be outsourced and what is to be left to your business to handle. the agreement needs to be fair and clear from the inception, in addition to clearly defining what services are being outsourced.â  formally agreed-upon targets, like service levels, can be a list that is as long or short as the business requires. they should be formed using detailed schedules so neither side has confusion or doubt about what is required of the service provider.â  termination conditions can cause disputes, especially if there is someâ type of transition and handover to a new service provider.