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Outsourcing - Part 4

Outsourcing - Part 4

Negotiating contracts and maintaining relationships

Maintaining relationships

Tony Joyner has seen it all when it comes to negotiating outsourcing contracts. Joyner is a partner at law firm Freehills, where, as a senior member of its national projects team, he advises some of Australia’s biggest companies. His mantra: Negotiate fairly, be vigilant and keep everybody happy. If only it was that easy.

“I did a huge outsourcing deal once, and on this rare occasion we were acting for the outsourcing company,” says Joyner.

“The customer was a very, very big Australian company. And they were exceptionally unpleasant. They were rude. They were arrogant. Our client needed this deal to survive. The customer knew it, and just crunched them. At one stage I asked: ‘Why are you being so rude to these people, when next week, they are going to be in your office in control of a critical service you need?’”

The people who were acting so awfully were a mix of the customer’s lawyers and finance people. From their perspective, they won the negotiation. They got the best contract possible for the least amount of money. But the net result of different people with different goals taking care only of their patch, mean such wins are always hollow.

Joyner says negotiation does not have to be a fight. The biggest issue in any outsourcing contract is to aim for that old chestnut — a win-win.

“There is no point screwing the people who will be your outsourcing partner,” he says. “Two reasons: If they’re not going to make enough money out of the deal, they’ll put their B-team on it and provide you with a sub-standard service. And on a personal level, they’ll hate you.”

Don't get too interested in who is selling, because you won't see them again

Joyner takes the view that in any complicated outsourcing deal you will not get all the detail right 100 per cent first time. There is always the chance to calibrate aspects of an agreement later.

“If you’ve done a deal that means the outsourcing company is losing money, or life is horrible for them, there is no point insisting on it because over the long term you will lose,” he says.

Joyner also advises clients to keep a close eye on the relationship. Whatever area of the business the outsourcing agreement covers, pay attention. The closer the outsourced service is to your core business, the more alert you need to be in checking user satisfaction and service delivery. The best way is to keep sufficient expertise in your organisation to monitor agreements intelligently. Don’t leave your organisation exposed.

The final task is to keep everybody happy.

“You need to make it easy for the outsourcer to want to do the right thing by you,” Joyner says. “Remember, you have handed them control over some parts of your business. If they want to do the right thing by your company on a personal level, then a whole lot of little irritations will disappear. And a whole lot of good things just happen. You don’t want your outsourcer taking advantage of you, but you need them to be happy. Happy outsourcer, happy service. That’s on an organisational level and on a personal level.”

For Bakers Delight CIO, Joanne Stubbs, as in any good relationship, it’s the little things that count.

“You have to go in with exactly the same objectives,” she says. “Rarely does this happen. The main rules are: Don’t have contracts that last too long, or if they do last for more than five years, make sure the contract is flexible enough to allow both parties, as they learn, to change the terms and conditions to reflect the new business environment or the mistakes made in the first contract. Because rest assured, you will both make mistakes.”

Read more in the CIO Australia outsourcing series

Part 1 - Top outsourcing countries and trends

Part 2 - Clients and incumbent vendors are renegotiating outsourcing deals before they expire

Part 3 - Global versus local

Also:

Nine ways to find hidden savings in your outsourcing invoice

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Tags offshoringoutsourcingBakers DelightcontractsTony JoynerFreehillsJoanne StubbsIT outsourcing

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