Without dedicated, ongoing governance, carefully negotiated and documented rights in an outsourcing contract run the risk of not being enforced. When that happens, the relationship that develops may look nothing like what you envisioned. Here are some tips for managing your outsourcing.
Stephanie Overby writes, “IT organizations put great focus into drawing up their outsourcing contracts, but those agreements alone do not guarantee satisfactory outcomes. Attorney Brad Peterson has seen it time and time again. ‘Time and money are spent on drafting the contract—often a substantial amount of money. And a tremendous amount of potential value is created in that contract,’ says Peterson, partner in Mayer Brown’s Chicago office and leader of its technology transactions practice.
“‘But then the engagement is handed over to a well-intentioned supplier management team that wasn’t involved in the contract and often can’t make heads or tails of what’s in it. ‘It’s understandable. Contracts are complex and confusing, and relationship managers are selected based on their knowledge of technology or their skill in building relationships, not on their knowledge of how to run a contract,’ Peterson says.
“Those professionals managing the engagement often don’t understand how their conduct or communication can impact their company’s legal rights, which can cause a number of problems should disputes arise. ‘The result is that the benefits for which you negotiated hard and are paying great amounts may be lost,’ says Peterson. What’s more, disputes may be more difficult to resolve, and those that aren’t becoming costly to litigate, requiring interviewing dozens of witnesses and sorting through thousands of emails to figure out what has happened and who is responsible.
“The real value of IT outsourcing is achieved through active governance—not only of the projects in play, but of the communication and interaction between customer and provider.”
Read on for seven tips for managing IT outsourcing contracts.