A strong relationship between a buyer and a service provider is the key to successful outsourcing. However, contractual agreements must also be factored into the equation in order to ensure that both parties will thrive in their new business agreement.
While relationships are a necessity for generating mutual satisfaction, how do we effectively encapsulate the fact that people (after all, services are the product of the humans that deliver them) need to operate within specific operating guidelines that delineate responsibilities and boundaries?
Our industry can sometimes get caught up in the mechanics of a contract – long and often complex documents that attempt to anticipate every possible eventuality.
Recently, a couple of my colleagues at TPI documented the industry's new "center ground" for certain contract terms. These reflect the prevailing positions among the contracts being negotiated, and we're publishing them to educate the buyers and service providers in anticipation of their next negotiation.
About the same time, the International Association for Contract and Commercial Management (IACCM) published data from more than 500 international companies and organizations, representing several thousand contract negotiators. The results describe the terms and conditions that they negotiate most frequently. The data tells us where time is spent and it reflects changing issues and concerns. It also reveals much about the ways companies behave and the value they place on their trading relationships. Check out the IACCM report at: http://www.iaccm.com/articles/toptenterms.php
The common theme here is that the shaping of outsourcing relationships can be more successful through a balanced and educated appreciation for the role of the contract. As the IACCM report summarizes, most corporations "declare a strategic intent to differentiate, to partner, to add value. But at the same time, they send internal messages about control, cost reduction, standardization and risk avoidance. They highlight the need to be flexible, adaptive and agile, yet they introduce... systems that enforce compliance and inhibit change. And in their trading relationships, they offer the promise of a match made in heaven - until they introduce the pre-nuptial agreement and its administrators".
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