The Five Steps to Outsourcing – Part Three

The last part to the outsoucing process concerns carrying out a well-managed and transparent process

In negotiation avoid shortcuts and set specific goals – and ensure they are delivered. Evaluate, clarify and frame negotiations to keep competition alive. Document all discussions and carry out frequent self-assessment and use a term sheet, this helps drive and track the discussion and allows apples to apples comparison -over time the term sheet can evolve into a contract. Good note taking then transference to the final document of the substantive requirement and agreements made during the discussion is important. Do not leave anything out of the agreement that important to you that was discussed and agreed elsewhere – if it is not in the agreement it does not count.

Partnership rhetoric will appear at some time in the discussions especially from the vendor side. Unfortunately partnership usually means giving all the risks to the vendor from the customer side or to closing off competition from the vendor side (sole sourcing). On the positive side partnership can be invoked to get over tricky points and put them off until later stages in the negotiation – however as we point out later some things should never be put off until after the contract is signed. Partnership should be based on performance and strict business principles not waffle.

Never ever let issues that should be solved at negotiation drift into ‘we will solve this later’ discussions. They never are and these can be a source of major conflict later. An old saw from the collective bargaining days is very apposite here: ‘It is better for the negotiation to break down rather than the agreement’. All-important details must be cleared before signing a contract – never sign until they are or you are courting disaster.

5.0 Set up a well executed communication process

Manage the up and down communication channels carefully. Make sure no senior management speak to vendors and control vendor access to senior management strictly. You will have to brief senior management about the risks of this issue. In best practice the rules of engagement will state that suppliers who circumvent the process automatically disqualify themselves. Some vendors are good at getting around the formal process to the senior management and exploiting this to short-circuit the tender process. We all know of ‘golf course’ deals that cut through a bid process and enable vendors to return to the customer team informing them they ‘know’ the requirements of senior management.

Keep talking to vendors and meet frequently to discuss the proposals – the more open and interactive the better the eventual outcome. Ask for alternative proposals reordering or cherry pick ideas from several contenders to shape the deal you want.

Communicate internally at an early stage and keep your own people up to speed at all times. Don’t imagine for a minute that you can hold discussions in camera and keep an outsource negotiation secrete. We cover this aspect in more detail elsewhere but bring staff on board at an early time can generally increase chances of success. Indeed the staff to vendor fit is a key success criteria for the whole business success of the process so informing must take place as early as practicable.

Last but not least when the deal is done do the deal – as quickly as possible begin to execute the agreement. We have heard of examples where the transference can take many years to actually take place and this is a disaster for all concerned.