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Information Technology Outsorcing Transaction - Halvey K.J.

Halvey K.J. Information Technology Outsorcing Transaction - Wiley Publishing, 2005. - 649 p.
ISBN-10 0-471-45949-6
Download (direct link): informationoutsourcingtransactions2005.pdf
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• Define roles. Many customers fail to realize that regardless of the type of transaction or the scope of the work, the contract’s terms and its form are subject to negotiation. As noted previously, there are instances where the customer can and should insist on drafting the agreement. In addition, the customer must determine what roles each individual on the negotiation team will play. Will a businessperson take a lead role in raising and framing issues, or will attorneys take on that responsibility? The negotiation of any contract is an adversarial process because of the competing interests of the parties. This does not, however, mean that each contract negotiation should be adversarial. The customer should enter into the negotiations with the intent to advocate its interests through the reasonableness of its position. Despite the customer’s best intentions, it is likely that the lead negotiator will at some point be regarded as confrontational by the vendor. This feeling, in turn, could carry over to the postcontract period and make the relationship between vendor and customer difficult. For this reason, many customers appoint counsel as the lead negotiator. Lawyers are familiar with the role of articulating positions and typically are less inclined to respond emotionally to the vendor’s counterproposals. Similarly, having the lawyer serve as the lead negotiator establishes a distance between the positions advocated by the lawyer and those of the customer, and enables the customer to play the role of problem solver. Before placing this responsibility on the lawyer, the customer should make certain that the lawyer fully understands the customer’s position on the issues and that the lawyer is willing to defer to the customer’s judgment at the appropriate time.
3.2 Negotiating Process 123
• Find a lawyer. Although many businesspeople prefer not to involve lawyers in a project until it is absolutely necessary (and while it may seem to be in the authors’ parochial interests to say so), it is advisable to choose a lawyer early in the selection process and to have that lawyer assess the legal risks associated with the legal relationship presented by each vendor. If the customer’s organization has a corporate counsel’s office, an effort should be made to identify a lawyer there who has experience with outsourcing contracts. If it is necessary to engage outside counsel, the customer should seek recommendations from other outsourcing customers and should ensure that the lawyer chosen has extensive experience in drafting and negotiating outsourcing agreements on behalf of customers. Once a lawyer is chosen, the customer’s representative should clearly identify the lawyer’s responsibilities and should decide the best method of involving the lawyer in the selection process.
• Term sheet. To the extent possible, the customer should seize the initiative in the negotiation process by preparing a term sheet for delivery to the vendor. The term sheet is a document that defines the customer’s position on the salient terms of the contract. This document can be used to inform the vendor of the customer’s positions or as a checklist for use in determining the adequacy of the vendor’s form contract. Ideally, the term sheet should be issued together with the customer’s RFP and should require the vendor to note any objection to its terms in the vendor’s proposal. This allows the customer to seize the high ground in determining the legal relationship between the parties by establishing the terms from which this relationship will evolve. Each proposal can then be evaluated in terms of the vendor’s willingness to accept the basic contract terms. If the vendor does not issue a formal proposal, the customer may wish to use the term sheet as an outline from which to inform the vendor of the customer’s expectations.
Regardless of whether the term sheet is issued to the vendor or employed by the customer as a point of reference, it is a vital document in the negotiation process, because it provides a framework within which the customer can build a viable contract. There are, however, several other reasons for developing a comprehensive term sheet. The first and perhaps most important reason is that developing such a document forces the customer to consider the operational and legal issues associated with the project. Through the analytical process of selecting and framing the applicable clauses, the key elements of the project are reinforced, and the customer becomes aware of the ramifications that a decision regarding one such element will have on another. This, in turn, gives the customer the advantage in the inevitable jousting over contract terms, because it will have considered most issues before they arise during the negotiation. In addition, if the term sheet has been issued to the vendor, it sets the framework of the transaction from the viewpoint of
124 Ch. 3 Negotiations: Strategy and Process
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