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Systematic approach to cutting costs

Companies could be wasting millions of pounds by not taking a rigorously systematic approach to assessing outsourcing...

Companies could be wasting millions of pounds by not taking a rigorously systematic approach to assessing outsourcing requirements and negotiating the most effective contract, according to a leading expert on outsourcing.

Robert Zahler, head of outsourcing at law firm Shaw Pittman, claims to have developed a methodology that will improve the success rate of contracts and reduce the time needed to negotiate a deal.

Speaking at the conference "Contemporary issues in global IT law", Zahler detailed his approach to guiding companies through the process of negotiating a large outsourcing deal.

The first stage of the process involves drawing up a chart to give an overview of an organisation's IT systems, outsourcing arrangements and business processes. "The chart looks a mess, like a DNA strand, but it shows managers the true nature of their IT," said Zahler.

Once the business user has a clear idea of their IT, they are in a better position to set targets for bidders and choose a supplier.

Zahler's approach breaks an outsourcing contract into three separate phases: the transfer of IT assets and staff to the supplier; early work by the supplier to consolidate or upgrade IT systems; and "transformation" of the user's IT over the long-term.

One crucial part of an outsourcing contract, a clause outlining its scope, can be negotiated in days, rather than months, using this method, said Zahler.

Zahler said his method has been shown to deliver. One of his firm's clients, credit reference agency Equifax, said it expects to save at least £43m over five years after renegotiating a major IT outsourcing deal with IBM.

Zahler likens his approach to getting a tailormade suit. "If you are getting a suit tailored, the first you agree the type of cloth and the colour," he said. "This is like the clause outlining the scope of the outsourcing contract. Then you need the tailoring, which is when the IT functionality is developed and refined for the user."

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