TORONTO — When it comes to negotiating outsourcing contracts, don’t put the cart in front of the horse, a panel of experts advises.
Group Inc. and EDS Canada Ltd. were part of a roundtable put on by the Toronto Computer Lawyers’ Group on Wednesday.
“”You need a very clear description of the scope of the work. If there’s one area that is trouble after the fact (it’s this),”” said Mario Lavoie, senior region counsel for IBM Global Services Canada.
Raymond Picard, vice-president information technology law for CGI, agreed. He said it needs to be perfectly clear what constitutes in and out of scope. This will help define the responsibilities of the parties. He also warned against negotiating a dollar figure before deciding what will be done.
“”Sometimes you just strike the price and you don’t even discuss the services levels. You go negotiate it, but then your hands are tied,”” Picard said. “”You may end up having to provide services at a certain level for a price which you would have never quoted.””
Richard Austin, in-house counsel for EDS Canada, said the basics are often overlooked. Objectives need to be stated clearly to the provider, he said, for the negotiations to head down the right track.
“”The customer needs to have determined why it’s doing the deal. It’s problematic for a supplier, who has approached negotiations on the understanding that the customer is really trying to achieve a technological advantage, to find out mid-way through that in fact this is cost-cutting exercise.””
The trio offered other recommendations to help foster good relations between client and provider. Lavoie said there has to be a balance of risks and rewards. The clients shouldn’t be concerned with getting the lowest possible price, he warned, but getting value.
Lavoie said thorough preparation is essential to swift negotiations. A company should know down to the last detail what its assets are and what it was costing.
“”The importance of preparation for these things is absolutely fundamental. You have to have this information,”” Lavoie said. “”These areas are the areas where you spend the most time in negotiations, and time is money and eventually your client gets tired of this six month-long negotiation.””
Picard said during the negotiation focusing on results and not penalty clauses will speed the process along and create good will.
Outsourcing deals often make employees nervous. Austin said it’s important to keep a company’s workforce well informed. This creates an environment conducive for success, he said.
“”The customer needs a complete team to approach an outsourcing transaction,”” he said. “”There is a benefit to a situation in which the customer has identified to its staff that the outsourcing is happening and involves them in the deal.””