Legal Pitfalls in IT Outsourcing: How to Minimize Transactional Costs (
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Anyone
who has gone through the process of securing an IT outsourcing deal for
their application development management, help desk, data center or
network services—deals that can often be worth in excess of $20 to $100
million dollars and take years to implement—knows that transactional
costs alone can be both enormous and onerous. But when managed
correctly, the legal part of the outsourcing process, including the
negotiations of a final contract, do not have to be deal breakers.
Designing outsourcing deals for efficiency, and with a focus on a
win-win approach from the get-go, goes a long way in helping to ease
the time and stress of outsourcing contract negotiations.
Some of the prevalent negotiation
time killers that delay an outsourcing deal include focusing on issues
that may not be the most relevant to the organization. For example, too
much time spent on limitation of liability (where you could have fairly
predetermined positions with your vendor in pricing the deal), or not
spending enough time on performance indicators or practical remedies
for problems that may develop. The goal is to use the contract as a
road map for problem solving once you are working with the vendor.
Also, many times, key stakeholders
don't understand industry standards and points of relevant negotiation,
or these stakeholders are not brought into the discussions soon enough.
This can result in bureaucratic time wasted later in the game and lack
of buy-in by major decision makers. To help
avoid unrealistic expectations, late-game changes and derailments from
a win-at-all-costs approach, follow these seven guiding principles to
keep your team on track:
Principle No. 1: Gather all key stakeholders in the beginning
Gather all key stakeholders in the
beginning. This includes the tech execs, in-house counsel, audit team,
risk management outside consultants, outside counsel, finance, and
other subject matter experts. Uniting these key stakeholders at the
outset will save time and money in the contracting process, without a
doubt.
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