Imitation is Flattery: "Sourcing Matters"

First came Spend Matters, the brainchild of Kevin Brooks and Jason Busch over a proper coffee one morning -- while both attempted to get over a hangover -- in San Francisco in the fall of 2004. Next came "Supply Chain Matters," a blog written by Bob Ferrari, whose substance and originality goes far beyond its namesake. Next, it was "Commitment Matters," by IACCM's own Tim Cummins, a real gentleman, even if he lacked inspiration for an original blog name. And after that it was "Sourcing Matters," by Equaterra.

So, I think we started a trend here. Fortunately, I care far more about promoting good content than hiring attorneys to chase folks infringing on the Spend Matters brand franchise (though given the difficulties of making money in publishing, we could probably build a nice P&L here, just as ePlus has savaged the eProcurement market from an IP standpoint with a junker of a product yet aggressive lawyers). The last unoriginal titled blog on this list, Sourcing Matters, by outsourcing adviser Equaterra, is another example of a site that has followed in the naming footsteps of this site and produces excellent content.

A recent post from this spring is a case in point. In it, the authors share exactly which terms are often most contentious -- based on their own survey research -- from a contract negotiation standpoint in outsourcing agreements (many of these hold for complex services agreements as well, in my experience, even if you're not involved in the negotiation or vendor management of outsourcing agreements). In order from most challenging to least, limitations of liability are highest, following by supplier financial risk, termination fees, pre-defined direct damages, termination rights, indemnities, step-in rights, service levels, fee structures and transition fees / credit structures. Interestingly, the list appears split fairly evenly between legal and commercial terms (with legal taking the top two spots, however).

Equaterra opines that when it comes to negotiating both small and large outsourcing contracts, "outsourcing efforts [are] an inherently complicated and complex process. While there are factors that can lessen or limit complexity, such as greater contract terms standardization, there was consensus among survey respondents that contracting is becoming more complex. Fifty-two percent of legal counsel polled indicated they have seen greater contracting complexity over the past few quarters while just four percent have seen less." In summary, Equaterra suggests that "Buyers of outsourced services must balance their business case goals with the practical likelihood of negotiating them into a contract. Buyers must work closely with internal legal counsel and procurement groups experienced with outsourcing, and should bring in third-party legal counsel and commercial sourcing advisors for current market expertise as appropriate."

In my limited experience with procurement BPO contracting, I'd agree that there are often numerous contentious areas. But commercial terms often outweigh legal ones, which are rarely non-starters and are usually open for negotiation. Still, in many of these agreements -- just as in complex negotiations in M&A deals -- I'll borrow a line from a business partner, Richard Lee, that a JD is probably more helpful in negotiation and deal structure than an MBA.

- Jason Busch

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