Negotiation Special 1: Beware of the Fine Print

INDIA: Sometimes the littlest things in life are the hardest to take. You can sit on a mountain more comfortably than on a tack.

Talk of sitting on an IT contract, and the ‘devil in the details’ can really get impish. Negotiation is an art, but it can take the proportions of real skullduggery with so many legal spiders hiding comfortably in their corners.

Before you know, the cobwebs are constructed, and so deftly, that it’s hard to simply brush them away.

Have you been watching the dotted lines carefully?

The big print giveth and the fineprint taketh away

A small matter like ‘how much to put on current pricing’ can have spiralling ramifications. If you are accustomed to navigating the inhospitable terrains of a license agreement and adept at the documentation rigmaroles, great. If not, there’s no option but to clarify.

Nothing can be carved in stone, but it’s equally handy and enduring to put it on paper if one goes by what William Synder, research VP at Gartner, with a strong grip on negotiations, advises.

“If it’s not on paper, it just does not exist.” He warns.

The corollary is because it is not on paper, it won’t be lived up to, in most cases, as he rightly asserts.

More so, if we are talking of US corporate Headquarters and legal departments. They just won’t allow anything without money. Until and unless, it’s an exception, like some regional customer, where relationship is more important.

So, why sweat the unruly stuff. Just put it on paper.

And ask some important questions before you leave the table.

Anantnarayan Seivur — AVP - Head ISG & PMG ,KPIT Cummins Infosystems Ltd gives a glimpse of some important tick-offs that not only have legal connotations but also some serious business drift.

Can you search a specific term and condition within contract?

Are all contractual rates and terms complying internally by the procurement specialist?

And while some questions that he suggests may seem too simple or obvious, that’s where the catch lies. More often than not, it really helps to check if you indeed got the pig in the poke.

Like: Do you know the saving leakage of your spend?  Or, do you know your contacts expiration date?

It would really help if one is enlightened on what is the mechanism and how it is tracked. Also, make sure your checklist includes compliance and regulatory ‘to-dos’.

“Do we know if the contracts are in compliant with the legal terms provided by your legal department? Do legal department review those terms periodically? There is a Sarbanes Oxley compliance program but has it been extended to contract governance?” Seivur further furnishes.

Cat is in the bag? Peep again

It’s either experience or an expert’s help. There’s no other way to skillfully maneuver all those questions that hide in invisible closets. We need a real good legal right hand to pull out the skeletons.

Use outside counsel, if needed.

As Hackett Global Business Services Practice Leader Honorio Padron underlines, “Experienced firms have contract templates that have most likely already been agreed to in terms of T&Cs by most vendors. As a matter of fact, hire an outside legal firm that has prior experience with the selected vendor.”

Having a legal team is what Seivur seconds too. “Authoring contractual terms & conditions and suggesting approval/review work flow for sensitive terms & conditions is necessary.”

If not, include them in your steering team, where there is enough representation from Finance and Legal sides.

The point is do not go at it alone. Nor take it for granted.

Padron iterates the importance of bringing the most current outside resources including external counsel.

“An in-house lawyer that claims that they are equipped to deal with a vendor’s law department is a dangerous thing. Consider hiring specialists.”

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Inch-tape as the whip

If you can’t measure it, there’s no way you can have an edge in the game. Costs, real spends or deliverables; everything hinges on two important questions: Has it been clearly put on paper? And would I be able to measure it right?

Like Seivur recommended: Are you electronically capturing the rebates, discount and incentives negotiated in a contract to ensure that you are getting the best out of contract?

Or like Sudev Muthya, President, IT Business CMS Infosystem cautions, the chaos between client and service provider is an interesting area.

“In many cases, there is no one way to measure the consistency of SLAs. There is a lot that hangs around their measurement. A service provider can always show three-errors on customer’s side.”

SLAs and KPIs impacting application performance need to be calculated backwards from the response time and cost perspective. Here security requirements could also apply. According to Dennis Drogseth, Vice President, Enterprise Management Associates, Inc., rather than isolating SLAs on a component basis, look for other means.

“Server availability is less important, than its impact on the application or applications it supports.” He illustrates.

Gulp the headlines, Chew upon the footnotes

Any business contract requires special golfing skills. But here you are a golfer on a galloping horse. You have to hit the 18th hole right, but have to avoid all the ditches and moors too. Here, anything that comes as a foot note takes on the character of divine revelation. It always helps to carry something extra.

Companies should go to the negotiating table with knowledge of their own performance, and knowledge of the market.

Benchmarking the selected processes is critical activity in order not to enter into an outsourcing relationship blind, Honorio Padron stresses.

“Always remember that the vendors do this in a professional way everyday. CIOs do not.”

The unfortunate part is that some ‘obvious’ and seemingly ‘little’ things are often ignored for bliss. Throwing caution to the winds may not create any tempest in your tea cup now, but it might silently precipitate into a bolt from the blue some time ahead.

Not having a good contract management process in place has consequences both to the buying organization as well as to the purchaser. As Seivur warns, “If no one is managing the performance of the contract, an organization is likely to fail to meet its goals that it had for the project associated with the contract. Such failures may include delayed timelines, cost overruns, and more.”

So take care of the fine-print in various contracts which by the way, or in fact, more so because, vendors do not reveal at the onset. The art (or science) of documentation, simplicity and transparency, is more necessary than you reckon.

Or, in other words: If you think you're too small to have an impact, try going to bed with a mosquito.

They bite hard. They bite deep. And they never make any noise.

Watch your mosquitoes.