Commitment Matters: Outsourcing Contracts Are Worthy of More Thought
Tim Cummins’ blog, Commitment Matters is full of fascinating ideas. What else could one expect from the founder of the International Association for Contract and Commercial Management and someone who has been in the trenches. Tim’s article on the complexity of contracting exactly relates to what I’ve seen in outsourcing: a basic legal framework with innumerable details memorialized in hundreds of pages of schedules. The schedules...
Offshore Outsourcing Vendors, Customers, and Advisors: They Should Know Better
Offshore Outsourcing Contractual Conflicts Never Payoff. Today’s Dallas News included an interesting article on the State of Texas’ seven-year, $863M IT offshore outsourcing contract with IBM. What makes it interesting? The doom and gloom comments by the esteemed outsourcing advisors, Equaterra and Sierra Systems Group. “In the final analysis, the current relationship is not sustainable,” the advisors say. Then they suggest...
Outsourcing Contract Penalties: Do Vendors Respond to the Pain?
“It’s odd that you can get so anesthetized by your own pain or your own problem that you don’t quite fully share the hell of someone close to you.” — Lady Bird Johnson If a pound of carrots doesn’t drive outsourcing vendor performance, maybe a little pain will? Read on to learn how to structure service level credits to incent vendor performance. Read More →
Outsourcing Contract Incentives: What is a Pound of Carrots Worth?
Do you wonder if contractual performance incentives work? These are the “bonuses” vendors get for exceeding service level agreement (SLA) performance targets or achieving certain milestones earlier than expected. We do, too. Take the poll survey, view the results, and read our nine suggestions on how to make the best use of contract incentives. Read More →
What Will You Do When India’s Tax Incentives Vanish?
One year from today, March 31, 2009, the Software Technology Parks of India tax scheme will sunset. When this happens, Indian companies will find their taxes increased from 10% to 20%. Depending on your specific contract terms addressing taxes, material changes, or other sections (talk with your legal team), vendor managers may be confronted with higher rates. What can you do to manage this? First, some background information. STPI was created...
Impact of Foreign Currency Exchange Rates on Outsourcing
One of the most challenging aspect most outsourcing relationships are now facing is the impact of the declining value of the US dollar in the face of the growing foreign economies in India and the Philippines. When the US economy was stable with gradual growth, the impact of foreign exchange rates was manageable. However, with divergent directions, many vendors are faced with significant financial challenges – and they aren’t hesitating...
Top Ten Service Level Agreement Considerations
Here are our top ten considerations for authors and managers of service level agreements (SLAs): MECE – SLAs should be Mutually Exclusive and Completely Exhaustive (MECE). By this, no two SLAs should measure the same thing, and there should be a SLA for every important aspect of the program. Too often we see SLAs that overlap, creating double jeopardy situations and misleading positive or negative performance reports. In addition, we often...
An Overview of The Outsourcing Statement of Work
We previously blogged on on the Contents of an Outsourcing RFP, but we didn’t dive into the detail of what goes into a Statement of Work (SOW). Here is a quick guide to get you started writing SOWs for outsourcing services. Your lawyers and consultants will be able to assist you further. Scope - One of the principle purposes of a SOW is to provide both the vendor and the client a high-level description of the work the vendor will provide...
Outsourcing Negotiations for Beginner Buyers
Let’s begin by saying that beginners really shouldn’t negotiate outsourcing contracts. Outsourcing contracts are among the most complicated deals to negotiate. The negotiating team must account for transition plans, disposition of assets and people, scope control, service levels, indemnification, liabilities, complex pricing schedules filled with escalators and descalators, governance, etc. It’s similar to a divestiture deal –...
