Thank you for sharing!

Your article was successfully shared with the contacts you provided.
It’s no wonder that in our chilled economy, outsourcing — a potential goldmine of cost-savings — is on the upswing. However, outsourcing also can be a career-limiting, tangled web of missed deadlines and cost overruns. Whatever the type of outsourcing, be it IT, business process or garden-variety, a successful deal requires strength of heart and a careful strategy. Start with these suggestions to avoid a management nightmare: 1. Do the Groundwork Before jumping into an outsourcing project with both feet, do the research required to determine whether your company will actually save money on the project (and meet your other goals along the way). Audit your company’s functional areas to determine prime candidates for outsourcing. Consider whether the function is something that can be effectively and safely done by an outsider. In selecting a service provider, check references, and do the necessary research to confirm the competence of your third-party partner. Don’t just take the service provider’s word for competence — look behind the curtain. 2. Get Help Once a subject for the project is selected, put together a strong team of people who can perform due diligence and create a strong business case for the deal. If creating a request for proposal, get input from representatives of all internal “clients” to ensure that all material points are covered. Consider adding outside advisors to your team to add expertise and an unbiased, unthreatened view of what functional areas might be good targets for outsourcing. 3. Give the Agreement Its Due and Stick to Your Guns Large outsourcing projects often require agreements as detailed and complex as any merger or acquisition, yet many times the parties put contract drafting and negotiation off until the eleventh hour. In doing so, they rob themselves of one of the great benefits of the outsourcing agreement — its use as a planning tool. Usually, several latent business issues spring to the forefront when the contract is being written and negotiated. If this happens when the parties are working to close the deal, the result can be a thrown-together, senseless provision that is of no practical use to anyone. The contract drafting process should be started early in the process, with the goal being to create a document that succinctly as possible states the duties, responsibilities and expectations of each party. Include cost-control measures in every area in which you are assuming a commitment. Treat the scope of work as an integral part of the contract, and note that a vendor-drafted scope of work often contains legal provisions that can effectively negate any gains achieved in the base agreement. Carefully detail deliverables, an adequately broad scope of what is included in defined services, a schedule for delivery of deliverables and services, and consequences for late or inadequate delivery. If applicable, include a tight service level agreement. Finally, be sure to retain ownership of your intellectual property and what the service provider develops under the agreement, as well as licenses to vendor intellectual property as necessary. If properly drafted, the agreement should function as a road map of how the relationship is going to proceed. This has the added value of memorializing the relationship for those managers that inherit the relationship, long after all the original players are gone. Once you have created this detailed and helpful document, don’t give it all away in the negotiation of the contract. Some common vendor comments include, “We must use our agreement,” “Our agreement isn’t negotiable,” and “We just don’t do it that way.” This is where strength of heart — and an experienced negotiator — are invaluable. Every contract, and every point in it, is negotiable — no matter what the service provider says. Outsourcing relationships are often complex, lengthy relationships and, like marriage, they are not to be entered into lightly or unadvisedly. Consider that the day may come when your agreement is under a microscope, and take the time and get the necessary help to craft it accordingly. 4. Plan to Manage Build into the contract a plan for assisting both parties in the management of the relationship. Consider what will be needed in the areas of reporting and periodic meetings. In addition, include an internal dispute resolution clause for giving the parties a process to expeditiously manage and resolve those inevitable disputes. Include a process for auditing how the relationship is going, and whether goals are being achieved. The agreement should include a process for proposing and memorializing changes to the scope of work, schedule and payment terms, as well as other contractual terms. 5. Prepare for the End Know at the outset that this relationship will not last forever. In fact, generally it is a good idea not to lock in for an exceedingly long period of time and to retain a right to get out of the contract if things don’t go as planned. However, as vendor’s sudden walkout can leave you in the lurch, it is generally a good idea to limit the reasons for which the vendor can terminate. Depending on the nature of what’s being outsourced, the end of the deal can be an especially tricky time. Include a transition period in the contract as necessary to ensure the function is smoothly transferred internally or to another vendor, and to keep the service provider contractually obligated to assist you in the transition. No two projects are alike, and this is just a sampling of the myriad of issues that can be involved, rather than an exhaustive list. However, taking these five steps will certainly put you further along the road to outsourcing success. Kathryn Twiddy is a partner with Kilpatrick Stockton, based in Raleigh, N.C.
OUTSOURCING: ESCAPING STORMS AND BUMPS Law Technology Newsasked the experts what advice they would give to a midsize firm that is considering outsourcing (some or all) of its technology. Here’s what they said: Joe Diodati, Cisco Systems Inc.: Outsourcing can help meet the challenges of reducing capital expenditures and mitigating network risk by allowing firms to find new ways to save money, win the war for talent, keep clients happy, and find their own strategic focus. Many businesses see the wisdom in outsourcing their communications infrastructure as networking technologies become more complex and network infrastructures become more important. Costs are rising, and companies are realizing that installing and managing a network is not their core competency. Outsourcing networking to a service provider allows firms to focus more of its internal resources on the primary goals of the business. The right service provider can manage the networking needs of midsize firms and provide scalable services, reliable performance, and network security. Choosing a service provider to manage your business applications and network services is a big step, but it can bring substantial benefits to companies who choose well. A well-constructed service level agreement can play a significant role in the success of outsourcing network resources to a service provider. By approaching a prospective service provider with a clear idea of your business needs, firms can avoid many of the pitfalls and enjoy the enormous benefits of outsourcing critical business applications and network services. Stephen Gallagher, New York State Bar Association: I strongly suggest that small to midsize firms outsource much of their technology. In order to survive in these turbulent times, firms have to focus on their core competencies, and most firms can not possibly keep up with the changes taking place with technology. Top notch technical people want to keep current to these changes, and you will have a difficult time keeping key people. Guy Wiggins, Brown Raysman Millstein Felder & Steiner: Consider outsourcing security, i.e., management of firewalls, VPNs etc. It’s very technical and time consuming to do in-house and most law firms don’t have the expertise or staff. Also, this is critical infrastructure that must be actively managed 24/7. We use Guardent to manage our firewalls, and we are going to be using Internap to manage site to site VPNs between our office. Outsourcing raises many tricky legal issues re: accountability, service level agreements, etc. Make sure that if you get involved in a major outsourcing deal, you use lawyers who have expertise in technology outsourcing contracts, who are familiar with the industry standards in this area. John Hokkanen, Latham & Watkins: Firms should think about outsourcing on a piece meal basis. To begin with, the different functions should be identified by groups, e.g., 1) help desk, training, and end-user support; 2) network backbone and file server infrastructure; 3) major application implementation and maintenance projects such as Elite/CMS Docs/iManage, etc.; 4) knowledge management/content development; and 5) litigation support. By separating these, one can outsource different pieces based on individual firm strengths, its ability to leverage internal personnel, and the degree to which any particular group works best by developing long-term relationships with the attorneys. Jo Haraf, Morrison & Foerster: Here at MoFo, we find great value in outsourcing targeted repetitive or time challenged events. For example, by outsourcing printer support, we gain a predicable monthly cost for toner and repairs as well as a third-party support team who eats sleeps and breathes printers, a technology that would otherwise be a sideline for the technology jack-of-all-trades in most of our offices. Although long hours are a fact of technology life, no one wants to wait up all night just in case the wide area network might have a problem. By outsourcing network monitoring to a firm who makes network management their core business, we rest well knowing that if a rare problem occurs, our third party experts will resolve it themselves or dispatch it to our carriers before they reach for us. If they do call with an outage, the call is in the “We’re on it, boss” form that all managers love: “We have a problem … here’s what I’m doing about it … when you would like your next update?” Dena Rafte, Rafte & Company: Probably the single most important factor in outsourcing one’s IT function is that you have a clear contract regarding what the expectations and responsibilities of the vendor are. In all probability, the vendor will provide you with a mix of staff members depending on the nature of the job at a particular time. That is acceptable provided that you are afforded the opportunity to (1) have a specified engagement manager (from the vendor) who will be your main point of contact, and (2) meet all of the vendor’s staff who will be participating in the support of your firm prior to the start of the contract. From a management standpoint, goals and objectives should be set forth with the outsource team just as you would with your own staff. Monthly or quarterly status meeting should be established. On the surface, outsourcing may appear as more expensive than the alternative of hiring in-house staff members. Managed appropriately, it is not. Properly done, the vendor should be removing much of the management headaches, as well as, provide you with a depth of expertise which you could not normally afford. If all you are getting in your outsource arrangement is a “junior” level contractor — run! M. Thomas Collins, Juris Inc.: From Juris’ standpoint, we don’t care. We can supply the firm directly or the firm’s outsource vendor of choice. But, the firm has to answer the question, “Who are we?” Is technology how you practice law and how you deal with and serve your clients? If so, you can’t outsource the main thing your success depends on without betting away the practice — there is more to lose than to gain. If technology is preventing you from successfully practicing law and serving your clients, then you need to do something to survive. Outsourcing to a proven supplier has a better chance of succeeding than building internal competence from scratch. What should the law firm consider? You need to have an exit plan. You need the right to switch vendors or return to in-house. The right is not enough, however. It has to be practical without undue risk to the survival of the firm. Craig D. Ball, Law Offices of Craig D. Ball: Be sure you factor all the costs and use a vendor whose reputation and resources guarantee recourse when you’re unhappy. Properly handled, outsourcing frees up capital — the spending kind and the human kind. It can also mean affordable access to expertise that might not otherwise be within your orbit or budget. It should foster continuity, so that you’re not always explaining a convoluted history to the geek du jour. It should also guarantee top of the line products and service. Remember: You don’t need to outsource obsolescence and incompetence — there’s plenty of that in house! Is your practice well-matched to the vendor’s approach to their service or product? An outsourced imaging center closed at 5 p.m. and on weekends may work for some, but not for most litigation firms. An outsourced network needs 24/7 on-site support. Are there hidden costs and extras to get what you need? Does the contract fairly mirror the promises? Negotiate away surprises. Finally, do the due diligence. John Tredennick, CaseShare Systems Inc./Holland & Hart: Most midsize firms already have a network, time and billing software, and the basic Microsoft Office programs. Unless you don’t, there is little reason to outsource here (although you might outsource management). The Internet is a different story. Few midsize or even large firms have the people or resources to manage Web applications. Outsourcing your Web site and your client or litigation extranets makes a lot of sense. You will get better technology, better performance, better security and better support. And, if you are putting client documents and data up there, you need professionals minding the store. So, who to trust with your outsourcing? It is a combination of people and technology, in that order. Start by finding people you trust. Unless you are 100 percent confident in the people behind the system, don’t bite. Check references. Are their customers happy with the service they are receiving. Test the applications you are considering. Unless they are simple and straightforward, you are wasting your time. Demo the software extensively before moving forward. Have others inside and outside the organization do the same. Ultimately, try it on a test basis. You shouldn’t have to jump in all at once. Remember the first rule of wing walking: “Don’t let go of nuthin, ’til you got firm holt of something else!” Burton “Buzz’ Bruggeman, ActiveWords Systems, Inc.: Don’t outsource.

This content has been archived. It is available exclusively through our partner LexisNexis®.

To view this content, please continue to Lexis Advance®.

Not a Lexis Advance® Subscriber? Subscribe Now

Why am I seeing this?

LexisNexis® is now the exclusive third party online distributor of the broad collection of current and archived versions of ALM's legal news publications. LexisNexis® customers will be able to access and use ALM's content by subscribing to the LexisNexis® services via Lexis Advance®. This includes content from the National Law Journal®, The American Lawyer®, Law Technology News®, The New York Law Journal® and Corporate Counsel®, as well as ALM's other newspapers, directories, legal treatises, published and unpublished court opinions, and other sources of legal information.

ALM's content plays a significant role in your work and research, and now through this alliance LexisNexis® will bring you access to an even more comprehensive collection of legal content.

For questions call 1-877-256-2472 or contact us at [email protected]


ALM Legal Publication Newsletters

Sign Up Today and Never Miss Another Story.

As part of your digital membership, you can sign up for an unlimited number of a wide range of complimentary newsletters. Visit your My Account page to make your selections. Get the timely legal news and critical analysis you cannot afford to miss. Tailored just for you. In your inbox. Every day.

Copyright © 2020 ALM Media Properties, LLC. All Rights Reserved.