Outsourcing can ease many maladies -- people shortages, skill gaps, and over-ambitious corporate plans, to name three. But increasingly, it can also improve your chance of seeing the inside of a courtroom.
Through the '90s, litigation fees related to outsourcing contracts increased 40% to 50%, according to Cutter Consortium technology fellow Tom DeMarco. In fact, DeMarco says, the average company with an outsourcing contract spends the equivalent of 15% of its IT budget on litigation in general. "Many companies don't realize this because the money comes from another pocket," he says.
Hardest hit by outsourcing litigation, according to Cutter, are companies who are new to outsourcing and government agencies. "The average cost of litigation fees [are] greater than the cost of coding, which is the bulk of a typical IT budget," DeMarco says. What's the fighting all about? Projects never completed, obliterated project budgets, and results that bear little resemblance to original plans.
The legal headache occurs more often than thought, DeMarco says. "It's nothing for the big systems integrators to have 50 ongoing cases at once."
To prevent a showdown in court, Cutter recommends:
- Writing a contract both operations and management can easily understand;
- Including a master agreement explaining legal terms and definitions, a statement defining the work to be performed, and service-level agreements defining the desired criteria and deliverables;
- Crafting a user's guide that defines the different areas of the contract, and preparing separate operating guides for reference for each section of the contract;
- Confirming that the contract states what was agreed upon by the negotiators;
- Training all operating personnel on dispute resolution; and
- Sharing the information with all parties -- everyone should know what guidelines are being used to complete the work.