Proven Approaches – Developing an Effective Outsourcing Contract
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Proven Approaches – Developing an Effective Outsourcing Contract

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Everest Group experts will highlight best practices in contract development and discuss how a well-crafted approach can significantly reduce risks and increase value capture.

Everest Group experts will highlight best practices in contract development and discuss how a well-crafted approach can significantly reduce risks and increase value capture.

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Proven Approaches – Developing an Effective Outsourcing Contract Proven Approaches – Developing an Effective Outsourcing Contract Presentation Transcript

  • Today’s webinar is brought to you byOutsourcing CenterToday’s webinar Upcoming webinarsProven Approaches – Developing an Effective Key Market Developments in Q4-2009: Market VistaOutsourcing Contract Report BriefingEverest experts will highlight best practices in contract Date and time:development and discuss how a well-crafted approach Wednesday, February 17, 2010can significantly reduce risks and increase value 8:00 a.m. CST / 9:00 a.m. ESTcapture.capture Presented by: Ray Anthony Roxas-Chua III Secretary, Council on Information and Communications Technology Office of the President of the PhilippinesAbout Outsourcing CenterOutsourcing Center is the world’s most prominent internet Oscar Sanezportal for authoritative information on outsourcing, serving President and Chief Executive Officerthe outsourcing community through: Business Processing Association Philippines (BPA/P) Trusted and objective third-party perspective Eric Simonson Database of over 81,000 opt-in subscribers Managing Principal – Research Relevant media including editorials, whitepapers, and Everest Group the annual Outsourcing Excellence Awards Anand RameshEmail Peter Bowes at pbowes@everestgrp.com f moreE il P t B t b @ t for Research Director – Global Sourcinginformation. Everest Group 1
  • Q&ATo ask a question during the Q&A session Click th Cli k the question mark (Q&A) button located on the floating tool bar in the bottom right of your ti k b tt l t d th fl ti t l b i th b tt i ht f screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 2
  • Introductions Steve Haas Michael Hedegard Principal Senior Consultant Everest Group Everest Group shaas@everestgrp.com h @ t mhedegard@everestgrp.com 3
  • Proven Approaches –Developing an Effective Outsourcing ContractFebruary 2010F b
  • Everest’s methodology consists of six phases with theService Agreement beginning to be created in theSolution Development phase Opportunity Business Case Solution Transition Optimization Identification Development Development Identify the Develop Identify target Planning and Production scope of financial delivery preparation Continuous work to be model source Implementati improvement outsourced Benefits Develop and on Process Develop analysis issue RFI to Risk improvement financial Risk analysis candidates Mitigation baseline Select Identify risks supplier Negotiate a d sign and s g SOW 5 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Table of Contents Overview of the components of an outsourcing contract Elements of a Statement of Work Detailed discussion of Service Descriptions 6 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Outsourcing contracts are typically structured as aset of Statements of Work under a Master ServiceAgreement Overall Master Service Agreement Service exhibit #1 Service Levels Levels SOW #1 SOW #2 Additional SOWs Service Description Service Description Pricing Pricing & Service Levels & Service Levels Service #1 Service #1 Service #1 Service #1 Service #1 Service #1 Service #1 Service #1 A typical outsourcing contract is structured as a Master agreement with subordinated Statements of Work (SOW) Each SOW normally contains a Service Description(s) & Service Levels, and pricing for the services performed 7 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • The Statement of Work describes the exact nature ofservices to be performed by the supplier Description Term Term of master relationship between parties Termination Total and partial termination options and flexibility Performance standards P f t d d Guiding i i l for ll G idi principles f all procured services d iBusiness Personnel Guiding principals for transfer of personnelrules (MSA) Details the confidentiality requirements of shared Confidentiality information Account management/change control g g Management p g principles/hierarchy for account p y governance Risk (limitations/liability, indemnification) Details boundaries of financial risk Charges/invoicing & payment Process, timing, and structure for payments Services Principles of services, service levels, and exclusivity of services Service Description Description of services to be provided & service levels Performance requirements and penalties Statement of Work Pricing g Pricing for services g Termination options Termination for convenience/cause 8 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • While the MSA is rarely modified, the Statement ofWork and its related documents are more frequentlymodified depending on the circumstances Frequency of When appropriate to change Typical changes changes Master Services Only when there is a significant Addition of a new SOW Almost never g Agreement change environment surrounding Ownership change during the life (MSA) the buyer-supplier relationship ( th b li l ti hi (e.g., of a contract f t t merger, regulatory changes)Increa Statement of Change in conditions specific to a Pricing structure change Yearly Work SOW (e g regulations innovation) (e.g., regulations, Change to a Service Level asing level o detail Project work Service Change to the specific services in Modification of the service, Measured in Descriptions p scope, responsibilities, or desired shift in responsibility or quarters or of results deliverable years Exhibits to Change to the boundaries for Adjustments to responsibilities Measured in Service delivering the services (e.g., Updated Desired Results weeks or Descriptions volumes, l l locations) ti ) Addition f l Additi of a location ti months th Change in regulatory requirements “Operations Whenever the “how” of the service Processing schedule Daily, weekly manual manual” changes; owned and managed by Disaster recovery plan the supplier Escalation procedures Contact information 9 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Table of Contents Overview of the components of an outsourcing contract Elements of a Statement of Work Detailed discussion of Service Descriptions 10 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Elements of a Statement of Work describe the supplier-buyer relationship and service requirements SOW #1Service Description Pricing & Service Levels The Service Description & Service Levels is one part of the SOW Exhibit #1 (for SOW #1) Each Service Description may refer to supporting exhibits Exhibit #2 (for SOW #1) Exhibits within a SOW are not referenced by any Exhibit #3 (for SOW #1) other SOW Example exhibits Transition plan Exhibit #4 (for SOW #1) Governance structure Privacy policies Exhibit #5 (for SOW #1) Exhibit #6 (for SOW #1) 11 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Table of Contents Overview of the components of an outsourcing contract Elements of a Statement of Work Detailed discussion of Service Descriptions 12 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • The most important part of a Statement of Work is theService Description Description Term Term of master relationship between parties Termination Total and partial termination options and flexibility Performance standards P f t d d Guiding i i l for ll G idi principles f all procured services d iBusiness Personnel Guiding principals for transfer of personnelrules (MSA) Details the confidentiality requirements of shared Confidentiality information Account management/change control g g Management p g principles/hierarchy for account p y governance Risk (limitations/liability, indemnification) Details boundaries of financial risk Charges/invoicing & payment Process, timing, and structure for payments Services Principles of services, service levels, and exclusivity of services Service Description Description of services to be provided & Service Levels Performance requirements and penalties Statement of Work Pricing g Pricing for services g Termination options Termination for convenience/cause 13 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • A Service Description is comprised of 7 sub-componentsfor each type of service Service Descriptions and Service Levels 6. Governance 5. Applications 1. Data center 4. 4 Helpdesk 3. Desktop 1.1 Overview 2. Network ~150 word overview defining the 1.2 Mainframe (details) 1. Data center high-level scope and relation to other activities 1.2.1 Description ~150 word description describing the 1.2 Mainframe service 1.3 13 Mid-range Mid 1.4 Production servers 1.2.2 Major Functions 1.5 Etc. Function #1 Function #2 Function #3 Function #4 1.3 1 3 Mid-range (details) 1.3.1 Description 1.2.3 Desired Results 1.3.2 Major Functions 1.2.4 Process Constraints 1.3.3 Desired Results 1.2.5 Responsibility Matrix 1.3.4 Process Constraints 1.3.5 Responsibility Matrix Task Supplier Buyer 1. X Task Supplier Buyer 2. X 1. 3. X 2. Etc. Etc. 1.2.6 Service Level Specifications 1.3.6 Service Level Specifications 1.2.7 Key Performance Indicators 1.3.7 Key Performance Indicators 14 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • In review, an outsourcing contract is structured as aMSA with subordinated Statements of Work thatcontain Service Descriptions and Service Levels Overall Master Service Agreement Service exhibit #1 LService Levels l Levels SOW #1 SOW #2 Additional SOWs Service Description Service Description Pricing Pricing & Service Levels & Service Levels Service #1 Service #1 Service #1 Service #1 Service #1 Service #1 Service #1 Service #1 15 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Outsourcing Support Services span the entireoutsourcing process and can be purchased to matchyour timing and decision-making process decision making Analyst Access (per call/subscription based) Strategy & planning Design Implementation and On-goingProcess Sourcing Project planningmanagement methodology workshop Market practices Data collection Pricing model Proposal review Due diligence toolkit workshop toolkit analysisSolution design & Competitive & Pricing model Risk analysis toolkitpricing Market Intelligence workshop Offshore leverage Location analysis Price benchmarking diagnosticStakeholder & Stakeholder Change Transitionchange interview toolkit management toolkit management toolkitmanagement Supplier selectionSupplier selection Supplier profiles Supplier short-listing Supplier workshops workshop Negotiation toolkitContracting SOW and Service Contract Terms and Negotiation planning RFP Toolkit Contract review Level templates Conditions workshopGovernance Governance Governance toolkit workshop pLegend Tools Decision Support Workshops 16 Proprietary & Confidential. © 2010 Everest Global, Inc.
  • Q&A Attendees will receive an email with a link to download today’s webinar presentation. To access a recorded audio version of this webinar, please contact Ben Kuhn (bkuhn@everestgrp.com) For background information on Everest, please visit: www.everestresearchinstitute.com www.everestgrp.com Thank you for attending todayTo kT ask a question d i th Q&A session ti during the i Click the question mark (Q&A) button located on the floating tool bar in the bottom right of your screen. This will open the Q&A Panel Be sure to keep the default set to “send to a Panelist” Then, type your question in the rectangular field at the bottom of the Q&A box and click the send button to submit 17