“What critical factors must a company take into
consideration when deciding which law firm to hire?”

Outsourcing consists of two distinct parts –a long-term service contract and the acquisition by the service provider of certain assets of the customer.

In choosing legal counsel you will want good commercial lawyers who are familiar with both aspects. How do you protect your interests in long-term service contracts and how do you deal with asset transfer, employment and related issues? Legal counsel needs to know what it is that his or her client needs and wants out of this relationship and must be willing to invest the time to get to know this. A good lawyer must also communicate and report to the client as the deal progresses to ensure that the lawyer and client both understand how the deal, when done, will meet the identified needs and deal adequately with the identified wants.

Outsourcing contracts run for a period of years. The lawyer must plan for and know how to deal with inevitable change.

The lawyer must facilitate a long–term, flexible working relationship between the service provider and the customer. The lawyer needs not only to be able to recognize problems but also to be able to solve problems creatively, finding solutions that work for both parties.

Counsel who have acted for service providers as well as customers have an advantage because they have developed an extensive knowledge of the interests of both, and each side’s negotiating strengths and weaknesses. Finding workable common ground is easier when you know the needs and wants of both service providers and customers.

Good legal counsel, as with any other discipline, requires a number of skills, balanced to ensure the optimal contribution to the team. The lawyer plays a number of roles in the outsourcing process, each of which require some degree of experience, substantive expertise, interpersonal communications and project management skills.

First, the lawyer must not only understand the client’s need in undertaking an outsourcing engagement, but also the key objectives to be achieved and risks involved. This means that the earlier the lawyer becomes part of the team – even at the stage of putting together an RFP or bid request – the more likely that individual will be able to provide valuable input and form a better understanding of the client’s objectives.

The lawyer must also recognize that employees, suppliers and customers, to name some key constituencies, are all affected by an outsourcing transaction. Outsourcing is more akin to a process and ongoing strategic relationship, than an individual transaction or event. The outsourcing relationship involves multiple facets – due diligence similar to M&A, confidentiality, information security, licensing and intellectual property development and ownership issues similar to technology contracts, pension, seniority, wage & salary and training issues involving employees, foreign exchange, cost control, asset valuation, tax, amortization and operating expense ratio issues which finance people deal with regularly, and risk management and audit concerns, involving insurance, performance and service level concerns, to name the most visible.

There are three things that a company considering an outsourcing transaction should look for in a lawyer: experience, experience and experience.

Recognizing the complexity of most outsourcing contracts, it makes sense to hire legal advisors who have developed an expertise in negotiating the agreements typically used to outsource services. Outsourcing agreements are voluminous and extremely complex, and cause even the most hardnosed corporate attorney to get dizzy. Buried in these agreements is language which typically removes any obligation on the part of the vendor to provide services in accordance with accepted standards, language which requires the company to bear responsibility for the vendor’s negligent actions, and language which prohibits the company from terminating the contracts in the event that the company is not satisfied with the services it receives.

Lawyers who specialize in outsourcing are accustomed to reviewing outsourcing agreements, and know how to cut through the morass of text and get to the heart of what is important. This includes negotiating meaningful performance standards. Additionally, a lawyer experienced in negotiating outsourcing transactions usually has developed positive working relationships with the attorneys who represent the outsourcing vendors. This relationship of trust and openness cuts down on the time and effort needed to negotiate the agreements, thereby making the process smoother for the company. Because the negotiations are wrapped up more quickly, this also cuts down on the legal fees a company must pay.