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Negotiating a good outsourcing deal, part 3

Editor's note: This is the third in a series of three articles on outsourcing from IT-Director.com. (1)

In this final article, we'll give you some more ideas on negotiating an outsourcing

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deal before you go off and do it for real.

One solution to the long term versus flexibility dilemma is to establish a long-term relationship under which exist multiple shorter-term contracts. This approach emphasizes the partnership aspect and takes into consideration that different aspects of the service will change at different rates.

Again, be realistic about price, as we've already said -- pay peanuts and get monkeys. And remember cheaper isn't better, superior service, 24x7 availability to five 9's, not exactly concepts that you would associate with the word "cheap."

As any good boy scout will tell you, "be prepared" the negotiation stage of the outsourcing process is no time for surprises, it is not clever to pull rabbits out of hats at this stage so don't. If you bring new things to the table then expect to lose ground, negotiating capital and any leverage that you may otherwise have gained.

Read the contract and make sure you know exactly what you are signing up for. Obvious it may be but you'll go through many iterations of the commercial and legal documents through the negotiation phase and a final read through to make sure it all hangs together at the end is crucial.

As with any negotiation, understand what is essential, what is desirable and what are the added extras in the negotiation and what can be traded for what. Negotiate on what is important. Being tough at all costs is one thing but make sure you make a stand on what is truly important otherwise you will lose negotiating capital. Attempting to negotiate hard on everything will only lead to both teams losing focus and the process becoming elongated.

Rome wasn't built in a day. Balance an aggressive time schedule with a realistic view of what has to be achieved. Don't let things drag on forever, agree a plan and make sure that milestones are met.

One important point to remember in the contract is the notice period. Consider all eventualities, the natural termination of the service where the service will be replaced by a new service that may be sourced internally or externally. Transferring the services to another provider or back in house. Any notice period should be reciprocal and should consider the complexity in transferring or closing the service down. If a service takes six months to transition, you can guarantee it will take as longer to exit.

So there you go. As we said from the start its not the Holy Grail -- but it is a start and probably offers you more than you already had -- so now go and put it into practice.

Click to read the first installment of "Negotiating a good outsourcing deal".

Copyright 2002 IT-Director.com provides IT decision makers with free daily e-mails containing news analysis, member-only discussion forums, free research, technology spotlights and free on-line consultancy. To register for a free email subscription, click here.

This was first published in November 2002

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