How to run an IT change programme without destroying your reputation

This Sponsored Post comes from Mark Elkington, Senior Managing Consultant at Barkers Commercial Services Limited.

When IT projects go wrong they can threaten the very existence of the company. In the worst cases, organisations can find themselves embroiled in time-consuming and expensive legal proceedings, as they seek regress from their IT service provider. For example, in 2018, Wipro settled a dispute with National Grid following an eight-year legal battle which cost them $75m. Hertz and Accenture are yet to resolve their dispute over web services, which began in 2016, when Hertz began proceedings to sue for $32m.

So, what are the pitfalls and where is most value added? Here are our top 10 tips on how to negotiate IT service contracts successfully:

  1. Set a Clear Negotiation Strategy: Fixing a negotiation strategy and agreeing this internally is essential before the first contract negotiation meeting takes place with the vendor. This should cover the negotiation objectives, timescales, internal leads, escalation points, governance and decision stages.
  2. Prepare Carefully for the First Meeting: The first meeting sets the tone. It is imperative that the vendor perceives you as knowledgeable, authoritative, organised and with a clear mandate from your business to negotiate on their behalf.
  3. Confirm the Scope: The breadth and depth of the scope of work will evolve both during negotiations and after signing. During negotiation changes should be carefully tracked to enable pricing challenges to be assessed. Commercial models in the contract must be flexible and unit priced, so scope changes can be accommodated without renegotiating.
  4. Separate Out the Commercial Negotiations: Commercial negotiations should be separated from negotiations on service and transition requirements. They are fundamentally different in terms of attendees, objectives of the parties, outcomes and how the process should be managed. Service and transition requirements are focused on mutual understanding and documentation of like-for-like requirements, or agreed enhancements managed between the knowledgeable service experts of both parties. Commercial negotiations inevitably require give and take where not every decision will be mutually beneficial.
  5. Set the Right Pace: Running the process too quickly will result in important details being left unaddressed or only partially resolved. Too many ‘TBAs’ in a signed contract will, in the absence of commercial comfort clauses, result in the price varying post-signing by up to 50%. Running the process too slowly will result in a lack of focus, often with too few resources deployed and issues debated for too long without resolution.
  6. Don’t Let the Supplier Do All the Work: It is very tempting to start the negotiation process with a contract that the supplier already has on the shelf. This often results in the overall process taking longer, because it does not represent what is required by the customer, and because the supplier has a greater propensity to stick to what they first issued. Creating and issuing the first draft of the contract to the supplier almost always bears fruit.
  7. Focus on the Transition Schedule: The transition schedule (including appendices) should be the longest schedule. This is the key to a successful IT services contract. A good business case can easily be destroyed by a poorly drafted schedule with insufficient detail and commercial protections.
  8. Communicate with Internal Stakeholders: If you don’t manage your internal stakeholders, then your supplier will! Regular, honest, updates for internal stakeholders, including face-to-face time with senior stakeholders, are essential. Agreement on how to progress should be reached and supplier communication strategies determined. This way a supplier is not able to ‘divide and conquer.’
  9. Be Clear on Team Roles: Roles on the negotiation team should be clearly understood and adhered to. Internal debates should be conducted behind closed doors. Listening to an internal debate taking place at the negotiating table will give the other party an advantage through revealing where weaknesses lie. One person on the team should be given the role of leader, and it is important that if that person is not the most senior person on the team, the leader role is still respected.
  10. Manage Risk: Over the course of the negotiation different risks will be identified and must be documented. Some will be mitigated through agreement with the supplier during the drafting process. Where it is not commercially acceptable to the supplier to mitigate these, it is important that they are considered prior to the contract being signed. If necessary, they may need to be confirmed acceptable through internal governance procedures. Working with internal audit and other governance bodies during the negotiation will make this final stage easier.

Considerable time and effort are spent training procurement personnel in negotiation, but much less time is dedicated to equipping those individuals to run large multi-stage negotiations over months rather than weeks. Many of the points above, although focused on IT Services Contracts, are equally applicable to Service Contracts for areas other than IT.

Happy hunting!

 

You can download a copy of the supporting white paper here.

 

Disclaimer: the opinions are those of the author and do not necessarily reflect the official position of Spend Matters

 

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