By Kit Burden Partner, TMC Department, DLA Piper Rudnick Gray Cary
Introduction
In dreamy moments, the mind of an outsourcing lawyer wanders to the mythical perfect negotiation process, whereby the deal gets done quickly and smoothly, with appropriate involvement of all stakeholders and necessary experts, and whereby both customer and supplier have ended up feeling that they have signed a good deal which will be the basis of a lasting relationship.
However, just as the imaginary champagne corks start to pop, you wake up with a cold sweat and the recollection of what the actual deal that you are working on is likely to entail, which more often than not will involve unrealistic deadlines, incomplete documentation, fraught relationships and a bucket load of stress! However, it really doesn't have to be this way, with the aid of a bit of thought and planning, and an appreciation of some of the more common "sins" to be avoided.
The Cardinal Sins
Negotiating for "Victory"
There is a temptation to see negotiating contracts - whether for BPO deals or otherwise - as being a form of gladiatorial combat, with points to be fought over and "won". Needless to say, this makes the process of bringing the contract to finalisation a good deal more tortuous, with adversarial positions being adopted which unfortunately often then spill over into the operation of the project itself.
The legal profession is far from exempt from blame in this respect, albeit that the overall position is improving as the body of lawyers who have genuine experience of BPO deals and the issues which they raise grow. What is in any event important is that both parties bear in mind that a "bad deal" for one party will inevitably be bad for both parties in the long run; for example, if a supplier feels that its margins have been cut to such an extent that it has no flexibility if it is to continue to make a profit, it will inevitably look to do no more than the "letter" of the contract requires it to, leading to frustration on the part of the customer and potential conflict as each and every request for services seems to result in the submission of an expensive change control note.
Forgetting what Negotiation will involve
In the early days of the procurement process, it is easy to forget quite what a task the process of getting to a finalised contract will be, and to plan accordingly. In particular, never forget that although the contract ultimately may result in just a couple of inches of paper, the crafting of just a single paragraph in it can frequently take hours of painstaking assessment and negotiation. Thinking that it can all be done in just a couple of days, however, is an all too common flaw. The net result is a project which initially lacks momentum and proceeds at a relatively slow pace, only to explode into a frenzy of activity in the last couple of weeks prior to contract signature, with the negotiation teams locked into a long series of late night/early morning meetings. Leaving aside the false machismo of such all-nighters, decision making in the wee hours of the morning is rarely a recipe for well thought out contract terms, or for ensuring that all required inputs have been obtained.
Equally, remember that if individual issues or areas of work are being divided amongst different teams, they need to be coordinated and guided as to use of common terminology and formats etc., so as to make the ultimate task of knitting their various outputs together a half way achievable project! Unfortunately, the fact that the different streams have been proceeding on mutually exclusive premises or assumptions will frequently only become apparent when their outputs are presented back to the legal team for incorporation into the contract, by which time the news that a lot of rework will need to be done will not be exactly welcome!
Deal Tourists
With BPO deals currently being amongst the "sexiest" projects on the block, there is a growing tendency to see people involved in their negotiation who have limited (if any!) knowledge of what is actually required in order to bring the process to a successful conclusion, but who simply like the idea of getting such a contract "under their belt". On the legal side, we also see M&A lawyers tasked with the negotiation of BPO deals, working on the assumption that as such projects will habitually involve the transfer of staff and/or assets, they are sufficiently similar to a business sale to mean that the skill sets from the M&A world should be directly transferable to the negotiation of an outsourcing contract.
The impact of such "deal tourists", however, is that the negotiations are hampered by a lack of real appreciation of market practice and norms, with positions taken in the negotiations which would never have been put forward by more experienced BPO negotiators who would well appreciate how unreasonable/unattainable such provisions might be. Equally, whilst such inexperienced negotiators may be able to cogently argue their case on the basis of the contract provisions put in front of them, what they lack is the crucial appreciation of what is not in the contract as then drafted, but which should be included.
The Way Forward
Ultimately, there is no substitute for experience, whether that be from the consultants engaged to help structure the overall procurement process or the legal team engaged to assist on the legal and contractual issues. Choose your advisers carefully, and they should be well placed to help you avoid some of the pitfalls outlined above, and ultimately guide your BPO project to a faster and sounder conclusion!
About the Author
Kit Burden is a partner in one of Europe's leading Outsourcing
and Sourcing legal teams at DLA Piper Rudnick Gray Cary (http://www.dlapiper.com/uk/).
He is recognised in the various legal directories as one of
the UK's leading outsourcing lawyers, and chairs the Society
for Computers and Law's Special Interest Group on Outsourcing.
Clients he has advised on outsourcing projects include both
leading users and suppliers, such as UBS, Royal Bank of Scotland,
TUI AG, Dixons, PricewaterhouseCoopers, Danfoss, Fujitsu and
Limit Plc
