Business Capabilities Sourcing
Edward Smythe opened the panel with an interesting discussion on the increasing integration of IT outsourcing (ITO) services and business process outsourcing (BPO), which have traditionally been distinct offerings. He explained that the combination of ITO and BPO would form into either:
- a business capability outsourcing service, where the vendor is in charge of supporting both the technology components and the processes that comprise a particular business function, or
- a platform-based service, where the vendor also provides the applications and infrastructure required to support the business function.
Sourcing process-focused IT solutions have many benefits beyond cost reductions (although these can be substantial), according to Ed. By measuring a vendor’s performance directly in terms of the business outcomes of the business function being sourced, the service levels can more closely tie the price and benefit of the service being performed to the benefit received by the client.
Rather than a traditional service-level model that usually links remedies in relation to the price of the services being provided, the “service levels” and remedies of an integrated business capability outsourcing service can be tied directly to the business impact of any service deficiencies, in addition to technical performance measures.
David Crane shared his experience with the attendees on negotiating service agreements with telecommunication providers. David highlighted a few unique aspects of telecom deals including the critical nature of telecom services to most businesses and the rapidly evolving and changing nature of telecom-related technology.
Similar to how consumers are increasingly saving on telecom services through bundling, David also explained how contracting for enterprise telecom services on a consolidated basis – both across the entire customer corporate group and in the scope of services – can create additional negotiating leverage and cost savings. His then gave his top five best practices for telecom contracts:
- clearly define the scope of services
- set precise service levels and associated failed performance remedies
- draft specific flexibility mechanisms to allow clients to take advantage of technological advances
- include price protection provisions
- negotiate appropriate exit mechanisms
Security, Personnel Continuity and Multi-Vendor Environments
The next panel presenter was George Takach who spoke on three particularly hot issues in tech procurement:
- Security issues – Recent high-profile cases of data breaches have brought the subject of IT security at the forefront of tech procurement discussions. George stressed the importance of appropriate background checks on vendor personnel and proper co-ordination between the IT security and corporate security departments.
- Personnel continuity – Frequent staffing turnover is one of the leading causes of disputes that arise in large-scale outsourcing relationships. In order to mitigate negative impacts, outsourcing clients should consider establishing longer-term commitments from key personnel or building in robust training and job shadowing provisions for replacement staff.
- Multi-vendor environments – Dual and multi-track negotiations are becoming more common on large scale procurement deals. Vendors should allow clients to be flexible in adopting multi-vendor solutions and clients should consider including a contractual commitment that requires collaboration between providers of different components of an overall technology solution.
Public Procurement and Anti-Corruption Risks
Brenda Swick closed off the panel with a discussion of trends in public procurement. She noted that recent treaties have opened up government procurement opportunities internationally for Canadian providers, however this also means greater competition is being faced at home. Brenda then provided an overview of procurement treaties and agreements that may impact domestic providers, both at the international level (NAFTA, WTO, AIT, CETA) and at the interprovincial level (TACOP, NWPTA).
From a government entity’s perspective, the challenge lies in knowing which agreements will have an impact on that entity’s procurement goals and adapting the bid review mechanism to ensure compliance with these new regimes. Providers also need to be aware which agreements apply to their prospective public clients and understand the obligations and recourses available under these regimes. A better understanding of how these multilateral agreements operate is essential for all involved in the bidding process to avoid potential corruption risks.