Is your organization taking pole position in ICT contracting?

D&I Quarterly Q1/2017

Posted on

13 Apr

2017

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Dittmar & Indrenius > Insight > Is your organization taking pole position in ICT contracting?

Over the past years customer organizations launching new ICT projects have become increasingly accustomed to offering their own ICT project or procurement contract templates as part of the RFPs (Request for Proposal). Lately, however, e.g. the cloud services suppliers have been somewhat more reluctant to accept customer contracts as a starting position for the negotiations. In fact, the cloud service suppliers have increasingly insisted and pushed for using their own standard cloud services contracts.

This battle-of-forms situation leads to a question: Are cloud services so different when compared to the more traditional ICT services and on premise –licensing? Does the mere fact that customer wishes to procure a cloud services solution entitle the supplier to adopt a take-it-or-leave-it bargaining position?

Things are never black-and-white; however, from customer’s perspective a short-sighted acceptance of supplier’s standard terms “as is” without using any real negotiation effort is definitely a risky approach. If your organization is procuring several types of different ICT services and solutions simultaneously, you would be better of to have the possibility to effectively compare and evaluate different suppliers’ offerings also from contractual risk management perspective. Using your own contract structure and contractual documentation also makes it easier for you to protect your organization from contractual pitfalls. It also enables you to align the multi-vendor co-operation and related service level agreements of the suppliers in an effective way.

So how can you as a customer manage the tendering and negotiation process in a manner that takes your organization to the pole position in this battle-of-forms race?

First, certainly you must have your own organization aligned and ready for the battle. Your ICT procurement and sourcing teams should have adopted clear processes and contractual documentation for inviting tenders for the ICT projects. Ideally, at least a term sheet of the key legal provisions should be attached to your RFP.

Secondly, you need to have the right line-up in place for the negotiations. Your dream team should possess adequate knowledge of the relevant business requirements within your organization, the necessary ICT sourcing expertise as well as experienced legal skills.

Thirdly, as a customer you should embrace the race mode in the negotiations. Having at least 2-3 actual suppliers taking part to the tendering competition is the key. There are far too many examples of situations where one supplier has been ‘given a project’ before finalizing the contract negotiations. This type of approach is like trying to win a formula one race with a punctured tyre – challenging to say the least.

Effective ICT contracting may require a change in perspective and a new approach, however, this transformation project within your organization certainly pays off in the end. The reasonable price tag on better contractual documentation saves your company from many troubles and costs down the line in ICT projects. Be ready and eager to take your pole position!

 

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