In the previous post, I looked at a Gartner Group survey, which found that one of the biggest issues resulting in contracts being prematurely renegotiated was that they lacked the flexibility to handle unforeseen changes. This is the second in a series of posts examining some of the ways in which outsourcing agreements can be structured to accommodate change over the life of the contract. In my last article, I looked at contractual mechanisms designed to accommodate unanticipated M&A activity. In this article, I look at mechanisms designed to address the financial responsibility for future changes. 

(i) Allocating Financial Responsibility . . . [more]

Outsourcing deals usually involve very intense and lengthy negotiation between supplier and customer team members. They spend months or year(s) together in planning, drafting and negotiating the agreement before the deal gets implemented or executed. There are at least two review processes that should take place shortly after an outsourcing deal is finalized. The first one is the contract handover process which provides an opportunity for the deal team to pass on the knowledge to the delivery and implementation team so that they can run with the project. The second review is the deal review or lesson learned session to . . . [more]

I was speaking with a colleague recently regarding whether mediation was a valuable tool in outsourcings, and if so, under what circumstances. We came to the conclusion that it is an appropriate tool for some outsourcings, but not all. 

It is inevitable in any outsourcing or large managed services arrangement that disputes will arise. Disputes arise for a myriad of reasons, ranging from a failure of the parties to appreciate and agree on fundamental business terms, such as differences of opinion on specifications or deliverables, to perhaps the more mundane question of whether a notice required by the agreement was . . . [more]

The provisions of outsourcing agreements relating to employees have grown more complicated. There was time, in the early 1990s, when the obligations of the service provider under the Outsourcing Agreement focussed almost exclusively on describing in detail the services to be performed. There was little mention of the service provider employees used to perform the services (or privacy, software or subcontractors for that matter). The times have changed however: in my experience at least, it is now customary for outsourcing agreements to include extensive provisions relating to the personnel used by the service provider to perform the services.

In this . . . [more]

Over the past couple of years, I have noticed that organizations engaging in outsourcing activities are increasingly willing to rely on service providers’ standard service descriptions. The main driver of this trend appears to be tight budgets. At a time of economic uncertainty, there is less capacity for rigorous review of a service provider’s standard service descriptions and service levels. Lacking internal resources, customers are increasingly relying on service providers’ expertise to fill in the gaps. A second factor may be a form of complacency. As customers accumulate a history of positive experiences with successful outsourcings, they may become less . . . [more]

I recently had the opportunity to ask some of my clients a few questions about their outsourcing deals. The following is based on those discussions…

1. What is one of the biggest challenges you faced at the procurement stage of an outsourcing and how did you manage that challenge?

Procurement of long-term, high-value outsourcing contracts is complex. You need to be able to negotiate appropriate risk transfer, service levels and pricing, while maintaining competitive tension between vendors bidding for the work. It is not as simple as firing off an RFP with pre-defined services and waiting for a crate of . . . [more]

InformationWeek recently reported on a very interesting turn of events in the outsourcing arena. The article titled U.S. To Train 3,000 Offshore IT Workers states that the Obama administration has launched a $36 million program to train workers, including 3,000 IT specialists and related functions in South Asia. Following the training, workers will be placed with outsourcing vendors in the regions that provide offshore services to American companies looking to take advantage of the Asian subcontinent’s low labour costs.

Clearly there are two ways to look at this. You can either view this as an inappropriate use of public funds. . . . [more]

On more than one occasion, clients have complained to me about what happens after the outsourcing contract is negotiated. The customer or service provider is sobering up from the euphoria brought on by signing the contract, often after months of intense, complicated discussions. They are starting to grapple with the overpowering reality of managing a complex outsourcing relationship on a day-to-day basis. That is exactly the moment when large components of the negotiating team disappear, usually including the lawyers who have supported the delivery organization throughout the contract negotiations. Members of the delivery team aren’t lawyers, but they are left . . . [more]

One of the most complicated things to address as part of a long term outsourcing is the implications of change. Gartner Group recognized this when it released the results of a survey in which it found:

• 55% of enterprises have renegotiated their outsourcing agreement terms within the lifetime of the contract;
• 15% of such renegotiations occurred within the first 12 months;
• only 23% of enterprises did not expect to enter into renegotiations; and
• nearly 8 in 10 outsourcings will go through renegotiations at some stage.

According to Gartner’s survey, one of the biggest issues leading to contract renegotiation was a . . . [more]

In any outsourcing or other large contracting arrangements, one of the principal challenges is developing good lines of communication with the client. Whether one is acting as corporate counsel, or outside counsel, it can be a challenge sometimes to explain legal problems and manage expectations to deliver the best advice possible to the client. To manage this concern, I have adopted some strategies which have proven helpful. 

Develop a process. Having a clear process in place for communicating and decision making on a deal is crucial. I have always been fortunate in that regard, as my clients are often

The natural objective of companies entering into outsourcing contracts is to get the best possible terms. The parties assemble working teams which include legal, technical, business and operational personnel. The teams spend weeks, if not months, in negotiating the terms and conditions. While the negotiation team members are very familiar with the end result, the rest of the team members may have very little knowledge of what has been negotiated. With the exception of the operational team members who will stay on to deliver the services or to manage the account, most of the negotiating team will disperse after the . . . [more]

In light of Quebec’s unique legal environment in North America (i.e. Quebec is a civil law jurisdiction with French as its official language), I thought I would use my first three contributions to Slaw to address certain issues peculiar to Quebec in relation to sophisticated IT contracts such as systems integration and outsourcing agreements. I have chosen not to discuss language related issues at any length for, except in Government related procurement scenarios, the contracting and negotiation process can be conducted in English in Quebec based on forms of agreements consistent with industry standards. I will rather focus on a . . . [more]