In this whitepaper, Kenneth Adler, a partner at Thelen Reid Brown Raysman & Steiner and Chair of the Outsourcing group, along with Danny Ertel, a founding partner of Vantage Partners and the head of its Outsourcing practice, examine the dynamics that typically drive many of the problems in outsourcing relationships and provide the keys to developing workable and durable solutions.
You've read the many and varied statistics about the numbers of outsourcing deals that fail, have to be renegotiated, or simply leave the customers dissatisfied and the providers losing money. We won't repeat them here, but suffice it to say that while it is not all bad news and outsourcing will continue to be a standard tool in management's repertoire, there are enough problems with these relationships and it is hard enough to get them back on track when they run into trouble, that senior management must take notice and must take action to remediate damaged relationships as early as possible.
It's not just how often there is trouble. All available research, from analysts, advisors, and academics confirms what many of us experience in practice: there is a lot of value at stake in how outsourcing relationships are managed. The difference in results between a deal that is humming along well in which the parties are solving problems together effectively, and one in which they are constantly pulling out the contract, fighting over who's at fault, and making threats is somewhere between 20 and 40% of contract value.
When these deals get into trouble and the parties decide to call for help, they often contemplate litigation or arbitration. While arbitration is often faster and cheaper than litigation, whichever of those you embark on, you can bet there will be a tremendous amount of value that gets destroyed in the process. While the process is going on, and even after it concludes, you can also expect it to become even harder to work effectively together.
For the complete article, please Click Here.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.