Imperial Oil reads the fine print on IT contracts

TORONTO — A formal relationship agreement with an outsourcer can mean the difference between a successful and failed project, according to an Imperial Oil project manager.

The audience of Project World, running

in Toronto from April 21 to April 25, was treated to a look at tools available to project managers in developing healthy relationships with third-party partners. Outsourcing is reaching further into the enterprise business processes and becoming ever more common thanks to advanced technology and lower costs of outsourcers. Working with a third party does introduce its own set of challenges however, Imperial Oil Ltd. project manager Jerry Babbin said Tuesday.

The challenges Babbin pointed out often revolve around the working relationship between company and its outsourcing partner. Imperial Oil has worked with outsourcers for years, he said, and has followed the standard practices for finding vendors. The company has become pretty familiar with the process of choosing a supplier, he said, but had traditionally paid little attention to the relationship with the vendor post-contract signing.

“”Relationships are not generally something you worry about until a project starts running into problems,”” he said. “” We used to think the vendors know what to do, so let’s leave them to it.””

That kind of “”arm’s length”” relationship led to a number of problems for the company. Babbin said Imperial Oil has had run-ins with vendor organizations which were “”obviously marketing driven. We didn’t know to what extent there was the lack of communication between their marketing team and the IT shop. So a number of promises would be made that just didn’t materialize.””

Projects dependent on third parties run into trouble, said Toronto-based Shore Consulting Group partner Joseph Siahou, because the business community still by and large doesn’t understand how an outsourcing company functions or how they make their money.

Typically the sales pitch will revolve around the outsourcer’s ability to cut down costs or to implement a process outside of the company’s core competencies, Siahou said. What the customer may not realize, he adds, is that outsourcing companies can deliver projects at lower costs because they have very specific processes they use over and over. Having to deviate from those processes at the request of the customer simply cuts into the profit margins of the vendor. That’s where the “”culture clashes”” reported by customers who have had problematic relationships with vendors usually have their roots.

There is an involved, but rather simple solution to the problems, Siahou said. Get everything in writing.

“” A lot of the stuff should be documented. You want to outline exactly what’s in scope and out of scope and try not to deviate too much from that. It’s when you deviate that you run into problems. If something is already defined, neither side can complain too much,”” he said.

Imperial Oil has adopted that exact approach, Babbin said. They’ve developed what he calls a “”relationship agreement”” which defines the expectations of both parties throughout the project. The agreement, however, doesn’t make sense for every contract and every project so the company has developed an internal risk assessment process. Only projects which are deemed higher risk get the additional agreement.

Just getting an agreement in place may not be enough though, Siahou warns. When it comes to contracts “”God is in the details.”” It may save everyone a whole lot of aggravation to run through possible problem scenarios before agreements are signed.

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