Negotiation Strategies for Global Sourcing Contracts
After choosing the appropriate outsourcing provider the negotiation begins. One of the biggest and most common mistakes made by IT executives is focusing on price when it comes to negotiations. The focus on price often leads to disappointment and frustration for both parties, which is why IT executives can greatly benefit from focusing on other essential aspects of the contract as well. The negotiation process is crucial in establishing the outsourcing relationship, which can last for many years and it is important that buyers understand how to prepare to negotiate.
A global sourcing contract is what defines the relationship and the requirements of each party. Both parties involved in the outsourcing arrangement must be comfortable with the terms and conditions that are agreed upon. The contract should include such items as the scope of work, pricing model, expectations, deliverables, performance measures, deadlines and termination conditions. All of these issues should be thoroughly discussed before a contract is signed. There should not be any components of the contract that could be considered “gray” areas, as everything contained in the agreement should be clearly expressed.
It is to a buyer’s advantage to take the time to adequately prepare for the negotiation. A company looking to outsource should understand objectives and needs for the outsourced projects, which will help maintain a better focus on the key issues when negotiating with the global sourcing provider. IT executives should also define and prioritize these issues and their approach and strategy for obtaining their objectives.
A strong global sourcing contract is one that balances the interest of both parties. The contract should be as balanced as possible to protect the interests of both the buyer and global sourcing provider. When the contract is clear and well-negotiated, it can maximize the effectiveness of the arrangement.
Before signing the contract, the document should be thoroughly reviewed, preferably by an attorney or industry expert. All of the agreed upon terms and conditions should be specified in the contract to avoid future problems.
The negotiation process for global sourcing agreements can be time consuming and it often takes longer than anticipated. Global sourcing providers sometimes take a substantial amount of time to respond to buyers. However, a buyer should never cut corners when negotiating with a vendor as a well-thought out negotiation is well worth the effort.
A&E Consulting helps companies looking to outsource by assisting with the development of an organizational global sourcing strategy, searching and evaluating global sourcing providers and establishing the outsourcing program. In addition, A&E Consulting will oversee the first outsourced project to ensure a smooth transition.
Tags: global sourcing, global sourcing contract, global sourcing provider