eSCM-CL Practice Page

eSCM-CL v1.1

About the eSCM-CL

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Capability Area Life-cycle Phase Capability Level Practice Type

Negotiations Guidelines
Sourcing Agreements Initiation Level 3 Guideline

The eSourcing Capability Model for Client Organizations (eSCM.CL) is a best practices capability model with two purposes: (1) to give client organizations guidance that will help them improve their capability across the sourcing life-cycle, and (2) to provide client organizations with an objective means of evaluating their sourcing capability. Its 95 Practices are arranged along three dimensions: Sourcing Life-cycle, Capability Areas, and Capability Levels. The Sourcing Life-cycle includes Analysis, Initiation, Delivery, and Completion, each of which represents an individual phase of the Life-cycle, plus Ongoing, which spans the entire Life-cycle. Capability Areas are groupings of Practices with similar content and focus. Capability Levels represent a path of improvement for client organizations. For more information about this Practice or the Model, please consult the eSCM-CL v1.1: Practice Details.

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2006-2007 by Carnegie Mellon University. All rights reserved.

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Part 2

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Negotiations Guidelines
Establish and implement guidelines for negotiations with service providers.
Establish negotiation guidelines in order to aid internal coordination and ensure that an agreement is reached that support the objectives of both the client organization and the service provider. Formal negotiation guidelines support the client organizations ability to consistently and eectively negotiate with service providers. Having these guidelines provides a structured approach to negotiation, which can improve the internal stakeholders condence in the sourcing organization. Guidelines also help protect the client organization from legal or performance issues by verifying that the necessary aspects of negotiations are covered. This Practice is related to agr03, Negotiations. Planning is covered in this Practice, but its main focus is on providing consistency in negotiations across service providers and within the sourcing organizations activities.

Sourcing Agreements Initiation Level 3 Guideline

Activities a. Provide support for creating and maintaining the guidelines for negotiations with service providers. b. Document and implement the guidelines required for negotiations with service providers. Documentation and implementation include the following Activities: 1. Identify guidelines for the composition and roles of the negotiation team.
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The makeup of the negotiation team may vary based on the type and stage of negotiations. Skills to consider include commercial negotiation (e.g., pricing), technical negotiations (e.g., service levels and operational details), and legal negotiations (e.g., terms and conditions). The specialists on the negotiating teams may include in-house technical experts with deep understanding of the companys requirements; external consultants who can assist in translating those internal requirements into the service providers requirement; and a contracts lawyer specializing in sourcing who can detect hidden costs and clauses in the agreement.

a) Decide appropriate representation from each relevant, major organizational unit on the negotiation team. b) Assign a lead for the negotiation activities.
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The negotiation team should be led by an individual with experience and skills in contract negotiation, who is also familiar with current trends in sourcing agreements. The team should include the individual who will have primary responsibility for managing the agreement. The service provider should be required to include on its negotiation team the individual who will have primary on-site responsibility for managing the service delivery. This will promote a common understanding of the intent of specic provisions of the agreement and commitments made during the negotiating process. While the negotiating team should be headed by an experienced manager and include a variety of specialists, it often does not include the CEO or executive leadership. These individuals are typically not involved in negotiations, but provide the negotiations team with their charter and authority.

c) Decide how the client organization will use third-party experts.

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During negotiations, the client organization may choose to use technical or legal experts to represent their interests.

The eSourcing Capability Model for Client Organizations (eSCM-CL) v1.1

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2. Dene the decision-making rules to be used during negotiations. a) Identify the negotiation approach to take for each type of service.
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Negotiation approaches may vary considerably between services and industries. Some services may have few negotiation issues, with service options and prices being predened. Other services may be very complicated and be able to be tailored considerably to meet client organization needs. A dened approach helps negotiators be consistent and have negotiation topics for each service prepared in advance.

b) Identify the constraints of the negotiation team.

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The negotiation team should have clear rules for how decisions will be made and approved, and what negotiation parameters exist. For instance, if the organization has strict budget requirements, these should be clearly understood and used as the basis for negotiation decisions. Negotiation parameters should include guidance on which issues the team has more exibility to negotiate, and on what decisions the team can make on their own without having to get approval. For example, a client organization may establish the constraint that the negotiating team may not approve a service providers standard contract.

3. Identify a set of negotiation topics.

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Negotiation topics can be based on prior negotiations; service provider responses to communicated requirements, existing organizational guidelines, policies, and procedures; organizational objectives; market information about services being sourced; and information known about the service provider.

4. Dene the organizations position on the identied topics.

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The client organizations position may be guided by prior experiences, organization and sourcing objectives, characteristics of the sourced service, and information on current practices.

5. Dene the organizations approach for conrming existing conditions.

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The organizations approach may treat conrming existing conditions as a one-time negotiating or transfer activity, or it could be designed to occur in multiple increments, leading to a nal true-up baseline.

a) Identify constraints for data collection. b) Determine schedule for data to be produced. c) Determine conditions for data security and privacy protection. d) Determine coordination requirements with the service provider. e) Determine approach to conrming service level agreements and performance measures, consistent with the organizations service level management approach.
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Refer to gov01, Sourcing policy, for guidelines regarding the organizations service level management approach.

c. Support the implementation of negotiations with service providers.

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eSCM-CL v1.1

Implementing Practices Using Required Activities Major Activities a and c in every Practice cover the tasks that need to be implemented to ensure that the organization can perform a Practice in a repeatable and consistent way. All Required Activities in Major Activities a and c are applied regardless of whether a Practice is a policy, procedure, guideline, program, plan, or other Practice. Each of the a and c Required Activities is directly linked to one or more Practices, called Support Practices which support the institutionalization of every eSCM-CL Practice. Each of the eight Required Activities in Major Activities a and c, and their relationships with the Support Practices, are shown in the table below. For more information, please consult the eSCM-CL v1.1: Practice Details.
CA PA B I LIT Y LEV E L 2 CA PAB I LIT Y LEV E L 3

a. Provide support for creating and maintaining the work products and tasks for x. 1. Provide sponsorship and resources for creating the work products and tasks. str01 knw01 ocm02 knw01 str01 knw01 gov04 ocm02 knw01 gov04 knw01 gov04 val04

2. Involve relevant stakeholders in creating, improving, reviewing, and approving the work products and tasks as appropriate.

3. Maintain and improve the work products and tasks as appropriate.

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b. Document and implement the work products and tasks required for x. c. Support the implementation of x. 1. Communicate the availability and location of the work products and tasks to relevant stakeholders. 2. Provide resources to effectively perform the work. knw01 knw01 knw01 knw02 knw01 knw02 ocm03 ppl01 ppl02 ppl04 knw01 knw02 str01 gov04

3. Assign qualied personnel the responsibility, authority, and accountability to perform the work.

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4. Communicate planned actions and their outcomes to relevant stakeholders.

5. Verify that the work is consistently and effectively performed according to the work products and tasks.

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Carnegie Mellon Universitys ITSqc is a multidisciplinary group of researchers, practitioners, and organizations that addresses the needs of IT-enabled service providers and their clients. To that end, the ITSqc develops quality models and qualication methods for organizations involved in eSourcing. The eSCMs are sets of complimentary best practices that are fast becoming the standard for sourcing relationships on both sides of the service relationship: service providers and clients. Organizations may be certied at one of ve levels based on their use of, and adherence to, the best practices in these Models. Information Technology Services Qualication Center (ITSqc) Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3891 Additional copies are available at the ITSqc website at http://itsqc.cmu.edu Excerpted from Technical Report No. CMU-ITSQC-06-003 Heey, W.E. and Loesche, E.A. The eSourcing Capability Model for Client Organizations (eSCM-CL) v1.1: Practice Details Published September 27, 2006, in Pittsburgh, Pennsylvania, USA.

Internal use: Permission to reproduce this document and to prepare derivative works from this document for internal use is granted, provided the copyright and No Warranty statements are included with all reproductions and derivative works. External use: Except as permitted by Consortium agreements, requests for permission to reproduce this document or prepare derivative works of this document for external and commercial use should be addressed to the ITSqc Director. No Warranty This Carnegie Mellon University material is furnished on an as-is basis. Carnegie Mellon University makes no warranties of any kind, either expressed or implied, as to any matter including, but not limited to, warranty of tness for purpose or merchantability, exclusivity, or results obtained from use of the material. Carnegie Mellon University does not make any warranty of any kind with respect to freedom from patent, trademark, or copyright infringement.

2006-2007 by Carnegie Mellon University. All rights reserved.