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The 7 Commandments of Sourcing Negotiations

by: Admin

Thursday, November 25, 2010 |

Tips for Sourcing Negotiations

The two categories that need to be dutifully reviewed in any negotiation are business terms and legal terms. Business terms cover the terms of service, including payment and the set deliverables agreed upon. Legal terms discuss regulations like liabilities, warranties, termination of the agreement and service definitions. More often than not, both business and legal terms are stipulated in the Services Agreement. 

Patrick Garrett and John Kitchen of Alsbridge Inc. shared 7 commandments that will be very helpful in any negotiation. Keeping these commandments will help in speeding up the process and coming out of it with pleasing results. Now, the 7 commandments:

1. DO maintain open communication at every step of the process - It is highly probable that you will be dealing with your provider for quite a long period of time after the agreement is signed and made official. It will be helpful to remain transparent about your issues and concerns during the negotiation process. You will find that most providers will be willing to go the extra mile to accommodate your needs.

2. DO relay your budget - The initial bid is essential when shopping around for a provider. It is precisely for this reason that you should relay your budget before anything else. That way, providers will be able to offer the most suitable set-up for your requirements, given your resources.

3. DO NOT share deadlines - Providers can stall and manipulate the situation to their advantage if you share your deadline. You can set target dates and on the occasion that you really have a tight deadline to meet, communicate an earlier date to your provider. Alsbridge advises on allocating a 4-6 week allowance.

4. DO share expectations - You should have expectations on service levels that you picked up from your research. Also communicate expectations with pricing because these terms are settled during the negotiation process.

5. DO share the Market Services Agreement - Legal firms provide a standard Market Services Agreement and providers should be able to agree on working with this document. Adjust terms to make the services agreement specific to your requirements and send a copy to your provider for their review. You can then negotiate on terms that should be aligned and arrive at a compromise.

6. DO seek third party counsel - Outside help from parties with strong sourcing credentials can be helpful; though this has remained to be a widely debated opinion. The answer varies on a case-to-case basis, depending on the industry you’re working on and the current situation. It’s good to note that sourcing advisors have a good scope of the market and their knowledge can offer you some leverage.

7. DO avoid gaming - Gaming is defined as controlling the situation to benefit your position through deceit. It can also mean suddenly changing your preferred terms after the agreement has been finalized. It is always best to keep communication lines open. Be transparent and honest to the service provider that you are working with because they are technically considered your partners in delivering your core competencies. 

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