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Tech & Sourcing @ Morgan Lewis


A recent article provided tips for effectively managing outsourced projects. The article addressed issues arising in geographically diverse and international outsourced projects, and focused on operational considerations to mitigate the issues. The adverse effect of many (if not all) of these issues can be avoided or reduced through mindful, strategic drafting and negotiating of outsourcing transaction documents.

Below are a few of the more prominent issues flagged in the article along with methods by which they can be preemptively addressed.

  • Help the outsourced party (or parties) understand your business and goals. This is a simple concept, but one that can be easily overlooked at the time of entering into an outsourcing arrangement. Beginning at the time of selection of an outsourcer and continuing through negotiations with that outsourcer, you should be mindful that the outsourcer fully understands your business, including your relevant processes, markets, customers, and people. In our experience, this tip becomes more important in situations where an outsourcer is entering a new market or a different segment of a market in which it was previously a mainstay. In these situations, disagreements during negotiations can result from an outsourcer’s view that “it has worked before, so it will work here,” assuming that terms that have been sufficient in their previous markets or segments will be sufficient for your business. If the outsourcer is able to better understand your business and its intricacies, particular issues arising from your business can be resolved and addressed in your outsourcing agreement.
  • Make sure everyone is working from the same playbook. Accuracy, overall effectiveness, and consistent application of the company’s requirements are benefits that result from following this best practice. Most would agree that it is important to develop detailed services descriptions and key performance indicators and/or service levels for your outsourcing agreement. However, an operations-level playbook should also be developed and maintained in connection with any large or otherwise complex outsourcing transaction. This playbook (often titled “Services Documentation” or “Operations Guide”) should address day-to-day interactions and methods of performing the services that are more granular than the services descriptions. The terms for developing and maintaining this playbook should be included in your outsourcing agreement, although the detailed and fluid nature of the playbook often justifies a mechanism to amend the playbook upon mutual agreement of select business leads rather than requiring a formal amendment to the outsourcing agreement.
  • Make sure everyone is working from the same files. Have good project management software and make sure all parties use it. Both of these practices should be considered when determining the software and technology requirements to be included in your outsourcing agreement. Your outsourcing agreement should clearly delineate (typically in an exhibit) the software and systems being provided by the company and those being provided by the outsourcer. You can also call out specific technology or systems to be used for certain processes within the services descriptions attached to the agreement. Often, the outsourcer is able to offer better software and technology solutions as part of their services offering. On the other hand, the company will often require the outsourcer to utilize its current software or systems for continuity purposes. By including software to address version control, document integrity, project management, and appropriate access to project data when developing this list of technology to be included in your outsourcing agreement, you are better positioned to reap the rewards of these practices.
  • “Sync up” regularly. It is important to maintain a fixed schedule with periodic “sync ups” between your company and the outsourcer to promote communication and accountability. This practice should be addressed with detailed governance provisions in your outsourcing agreement. Your agreement (or an exhibit to the agreement) should specify committee types, committee members, and the frequency of and topics to be addressed at meetings of those committees. Governance should not be limited to high-level executive committees. Operational committees and/or key operational roles from each side—each with defined roles and periodic required meetings—are equally important to a successful outsourcing relationship and should be addressed in the governance provisions of your agreement.