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�The Fast Track to a Win/Win Outsourcing Contract�
Inking an outsourcing contract that delivers sustainable value to both the client and the service provider requires an intricate blend of art and science, supported by exceptionally deep industry insider�s knowledge. To be truly win/win, the final deal must possess five main characteristics. First, it must meet or exceed marketplace best practices for services, performance, price and terms. Second, it must strike the right balance between the financial, commercial and service imperatives of both parties. Third, it must properly allocate risk and contain all the mechanisms needed to manage the consequences of identified risk. Fourth, it must contain the working tools needed to rapidly and effectively respond to dynamic, high impact organizational or market changes that may occur in the future. Finally, the relationship between the client and the provider must be built on trust and mutual respect.
But because the client is incurring expenses and managing risk until the moment the contract is signed and the deal is rolled out, it�s a smart move to fast-track the path to contract. A tall order? Absolutely. And under no circumstances should important issues be ignored simply to accelerate deal signing. But there are some proven best practices and lessons learned for getting both parties on the same page more quickly, and staying on the same page throughout the lifetime of the contract.
Before Distributing the RFP
1) Assess Your Current Operations � By doing so, you�ll be able to understand how you are performing against your peers and the marketplace; this will enable you to gain better clarity around your outsourcing initiative.
2) Access Market Knowledge � Make certain you obtain a full 360o view of the market including the service provider landscape and enduring best practices.
3) Develop and Define a Clear Strategy � This strategy must address a wide range of questions and considerations including: What do you plan to outsource and why? How will you secure the requisite internal alignment to ensure outsourcing success? What type of relationship do you want with your provider (e.g., transactional in nature, highly collaborative, etc.)? Is offshoring an option? What�s your organization�s desired �future state�?
When Inking the Deal with the Selected Provider
1) A High Degree of Collaboration � Developing the contract in a partnership-oriented, collaborative manner is the most desirable and value-producing approach. Collaboration includes joint planning and sharing of information; deep bi-directional loyalty; a solutions orientation; shared rewards; process and data integration; customization for the unique needs and requirements of the initiative; and an agreed-upon understanding of what, if any, �innovation� is desired from the engagement
2) Open, Honest Communications � Now is not the time to hold back information or test the provider�s knowledge. The more the provider understands your unique situation, requirements and future state desires, the better it can solution the deal for you. The two of you are entering into a partnership, and full disclosure is critical to success.
3) Retained Organization � Now is the time to clearly define what the retained organization must look like. What skill sets are required? Does your team possess those skills? If not, can they be trained, or must you hire new personnel?
4) Governance Design and Build � A proper and effective governance program and team will focus on service delivery management, governance, contract management and financial administration, and describe decision rights, stakeholder interfaces, job descriptions and organizational design, among others. But many companies wait until far too late to design, build and implement their governance program. The right time to do it is prior to the go live date.
Can the path to a win/win contract be fast-tracked? Absolutely. But the keys to success lie in early-on due diligence and strategic planning, and honest communications and collaboration with your soon-to-be service provider partner.
Author: Stan Lepeak, Managing Director of Research, EquaTerra (News - Alert)
EquaTerra sourcing advisors help clients achieve sustainable value in their IT and business processes. Our advisors average more than 20 years of industry experience and have supported over 2000 transformation and outsourcing projects across more than 60 countries. Supporting clients throughout the Americas, Europe, Middle East, Africa and Asia Pacific, we have deep functional knowledge in Finance and Accounting, HR, IT, Procurement and other critical business processes. EquaTerra helps clients achieve significant cost savings and process improvement with internal transformation, shared services and outsourcing solutions. For more information, please contact Lee Ann Moore at +1 713.669.9292; leeann.moore@equaterra.com; www.equaterra.com.
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