By Robert L. Scheier
There’s a lot of talk in business about breaking down the information and process “silos” of information and process that keep different parts of the business from coordinating effectively.
This is especially important for both service providers and customers while negotiating outsourcing contracts, according to a panel representing both sides at a recent Sourcing Interests Group regional summit in Seattle.
For the customer, having end users and lawyers involved from the beginning can highlight problem areas early, and lay the groundwork for the ongoing governance that’s so important for the long-term success of the outsourcing deal.
And for the service provider, having the team that will deliver the services on hand during the contracting process helps ensure “we can really deliver” what we promised, said Jill Zunshine, vice president, Americas region global procurement, at Hewlett-Packard. That might seem obvious, except for anyone who’s ever heard a tech salesperson cheerfully commit his company to something it has no hope of actually providing.
Marina Gracias, head of global sourcing for Visa, who worked in the credit giant’s legal department before moving to global sourcing, urged her fellow customers to take a broad view of what constitutes outsourcing and what risks might be involved. “Any time you purchase a good or a service, it’s outsourcing,” she said. “You need to understand all the risks, even if it’s not in the formal contract.”
Speaking of contracts, she suggested involving legal counsel early so they can ask the “what if” questions if their job to bring up, but which the business managers might not have considered. As with any process, such objections or concerns are easier and faster to deal with the earlier they are raised.
Another way to speed the contracting process is for either the supplier, or the customer, or even both spell out the detailed terms and conditions early in the process, rather than leaving such “fine print” for the end. Gracias said Visa includes a copy of its proposed terms and conditions with its RFPs, so vendors can see them up front. Her team has also worked with Visa lawyers so it knows up front “when we do and don’t have to consult them” on proposed contract changes, which further speeds the process.
Zunshine said HP creates a “war room” including everyone from the solution architects who will work with the customer to procurement and legal staff so HP does only “deals we can deliver. That requires having the delivery organization examine the proposed service contracts to make sure they’re realistic.
Another major theme (which echoed throughout the SIG sessions) was the need for ongoing governance and management of contracts after the deal is signed. “You can have a great contract but unless you have governance and communication…(you) will fail miserably,” said Trudy D. Fountain-James, senior vice president for contract and business management for ACS, a Xerox Company.
“You’ve got to get the business to understand they have to be involved, and actually participate in the governance, and actually do the management,” said Gracias. All too often, business units have the attitude of “I sign the contract and I’m done. And yet, they’re not done…(they) need to step in and do the day to day management and participate in the governance process. They must be at the table, and actually interacting with the supplier.”