It’s really refreshing when lawyers understand outsourcing as much more than a cost reduction and risk avoidance exercise.
This is an important point to ponder as The Vested Outsourcing Manual hits the bookstores this week, because it has extensive guidance about the priorities that attorneys for companies and service providers should bring to modern outsource deals. It’s also about the mind-set shift they need to make.
Too many attorneys concentrate too much on pushing risk and limiting liability.
There is however growing momentum for a somewhat different legal focus with respect to outsourcing: a partnership. I’ll feature two of my favorite legal experts, Oliver Kirchner and Ed Hansen, in this week’s blog and follow up with Jeanette Nyden, George Kimball and Jim Groton my next post.
Kirchner, senior legal counsel, global Commercial Transactions for Nokia Siemens Networks recently spoke about why outsourcing deals “turn sour” at the at the Arab Outsourcing Conference. He talked about how contract terms and conditions can cost you (which I wrote about in a previous blog post); he also stressed that outsourcing is a long-term business relationship that should be regarded as a partnership. An adversarial, rather than collaborative legal framework, does not contribute to the idea of a partnership. Lawyers, along with third-party consultants, “can only add value [to the outsource relationship] if they are involved early.”
He says it is important to make sure the legal team understands the outsource deal and doesn’t follow its own interests. In the end the deal is reflected in the legal contract, but the job “doesn’t end when the contract is signed.”
Ed Hansen is another one of my favorite lawyers who “gets” that outsourcing is more than a “transaction.” Ed recently moved to the Baker & McKenzie law firm’s New York offices because he felt that the firm’s approach to outsourcing was the most closely aligned with his. Ed not only gets outsourcing – he’s leading the revolution with his thought-provoking outreach efforts and articles like this one, “Negotiating Complex Technology and Outsourcing Relationships,” which he co-wrote with Carolyn Edgar and Marland Webb. Ed is also a frequent and popular speaker at industry events, which is where I first met him talking about relationship-based contracting.
The article notes, “Relationships based on contracts tend to fail; contracts based on relationships tend to succeed.” Ed adds that the worst way to start a process for negotiating a complex outsource deal is to “put risk and price right upfront.”
He says the challenge “is to achieve a relationship with our client’s vendor that functions independently of, but in alignment with, the contract, while providing the business with the contractual tools that they need if the relationship needs adjustment or fails. This requires a contract that is the result of a process that identifies the elements of the relationship, with a contract following that embodies those elements.”
The article also outlines “four principles of outsourcing” that jibe nicely with the Vested approach to the agreement framework and governance with insight:
– “The relationship is paramount
– “Transformation is not a strategy
– “If outsourcing, you should not be as good at the outsourced services as the outsourcer is
– “Like or not, this has to be thought of as partnership.”
Ed writes that in a complex and/or “transformational” outsource project, which can require an unprecedented working relationship between company and service provider, getting involvement by legal counsel early-on in the process is a “critical factor” for success. “Unfortunately in many organizations, counsel may not be brought into the process until it’s too late to effectively influence the outcome.”
Kudo’s to Oliver and Ed, lawyers that are pushing for a partnership mind-set—rather than a one-sided protective strategy—to make the deal succeed. If I was picking a lawyer to be on my team these two would be at the top of my list!