A Letter From Your Sourcing Advisor

En el siguiente articulo se desafía al CxO a revisar las estrategias de negociación que quizás hayan cosechado éxitos en el pasado pero que a la hora de afrontar una relación de externalización de servicios críticos conllevan riesgos importantes relacionados en gran medida por la diferencia en la naturaleza de este tipo de contrato. Por la peculiaridad de las expresiones utilizadas hemos dejado el articulo en versión original.


The following story is fictional and does not depict any actual company or event

Dear Client,

The good news is that your situation is not uncommon; many of our other clients are also facing vendor relationships that have gone awry. The bad news is that this fact alone doesn’t really help you: misery may love company but it doesn’t pay the bills.
I know we have discussed the issue many times and I’m not debating your touted skills as a negotiator. In fact, I do believe that in the past you have been very successful at negotiating deals which have gone a long way to advancing the company’s interests. Unfortunately, our experience has unveiled a corollary to Einstein’s famous quote that “Problems cannot be solved by the same level of thinking that created them” and that is that “past successes can often create the level of thinking that is currently causing your problems”.
The key insight is to realize that negotiating a complex acquisition or the purchase of infrastructure facilities is essentially different from negotiating a strategically important outsourcing deal in one critical way: IMPLEMENTATION.
The former may be successfully concluded using your favourite negotiating strategies essentially because how you come to the agreement is of little consequence to the final outcome. However, when it comes to the outsourcing of critical IT or business processes the situation changes. In these cases implementation is critical to success, longer in execution (being measured in months) and most importantly intensive in interaction between the teams of both organizations. This interaction exists not only during the implementation but also during the entire life of the contract. Finally, in most cases the future success of both parties is closely linked to how the cross-organizational teams work together and how successful they are at continually improving the cost/quality sides of the equation.
For these reasons (among others), negotiation has to be less of a horse trade and more of a trust building exercise. This new way of negotiating should include the following principles:
• Rights and responsibilities must be well defined and unambiguous.
• Those who will have to implement should be consulted and be made part of the process from the outset.
• The negotiation process cannot be separated from the relationship after signing. Deposits and withdrawals from the trust account during negotiations will spill over into the implementation and execution phases.
• The us vs them mindset must be replaced by a collaborative approach since it will be difficult to change gears after signing the deal.
• Building trust should take priority over trying to “score” quick wins over the counterpart or holding back essential information.
• Understanding the implications of the agreements being discussed is more important than closing the deal quickly.
• Potential deal breaking issues must be shared openly and as soon as possible with both sides looking for creative win-win solutions rather than trying to force their own agenda.
Finally, a few words on Service Level Agreements (SLAs); SLAs are undoubtedly an important part of any outsourcing deal. However, it is even more important to always bear in mind the nature of that importance. SLAs should not be about enforcing contract terms that are evidently shown to be unrealistic in the implementation and execution phases. Neither will they, of themselves, necessarily guarantee the interests of the client. Moreover, with the ever changing nature of business requirements in today’s markets, an excessive obsession with SLAs may actually cause the vendor to place unwarranted focus on aspects that upon signing were essential but which over time have become less important, leaving other more relevant aspects unattended. SLAs should rather be treated as an instrument to be used by both sides to set objectives for the performance of services rendered, to measure that performance and by that measurement to plan actions that will continually improve service levels.
In summary, SLAs cannot replace a fluid and closely-coupled relationship with a vendor which must be based on trust which must be fostered from the first moment that the two organizations decide to explore a potential deal. So, dear client, I would advise that you consider your traditional negotiating practices and challenge them in light of the crucial difference that outsourcing relationships imply. I hope that this advice may help you improve your ties with such strategic partners and give you the value that you are looking for.

Sincerely,

Your Sourcing Governance Advisor