From the Trenches: Advice for Negotiating Your Next Outsourcing Deal
By: Marc Stark, EquaTerra Contract Architecture and Negotiation Specialist
When it comes to contract negotiations, you can never be too prepared. Here is advice to help you improve your position with your service provider.
Dig the Details: When putting a contract out to bid or issuing an RFP, use a detailed assessment document to track the differences between service providers. This becomes a key negotiations tool as it can provide insight into material distinctions between bidders during the down-selection process and gives you the opportunity to leverage the competitive situation among the providers. Additionally this level of detail will enable you to normalize the bids.
Avoid Being Taken Hostage: Understand your exit rights, obligations and associated costs at the outset of a relationship. If you don’t, you could find yourself in a hostage situation at the end of term.
Tap the Best and Brightest: If innovation or new product development is a priority, consider negotiating guaranteed access to your service provider’s “rocket scientists.” This can be negotiated as a set number of support hours on a monthly or quarterly basis and should align with your intellectual property rights related to such innovations and developments.
Service Levels End-to-End: If you have multiple providers, consider creating a service level penalty pool to which each provider contributes a certain percentage of their monthly revenue. This enables end-to-end service levels where all providers contribute to an ‘at-risk’ pool irrespective of who is at fault. This is difficult to achieve during the negotiations and should be undertaken upfront in the process in-order to get appropriate support from all parties.
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