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eSCM-CL Practice Page eSCM-CL v1.

About the eSCM-CL


The eSourcing Capability Model for
Client Organizations (eSCM.CL) is a

agr01
“best practices” capability model with two
purposes: (1) to give client organizations
guidance that will help them improve their

Negotiations Guidelines capability across the sourcing life-cycle, and


(2) to provide client organizations with an
objective means of evaluating their sourcing
Capability Area Sourcing Agreements
capability.
Life-cycle Phase Initiation
Capability Level Level 3 Its 95 Practices are arranged along three
Practice Type Guideline 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.


228 Part 2 agr

agr01 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
Sourcing Agreements reached that support the objectives of both the client organization and the service provider. Formal
Initiation negotiation guidelines support the client organization’s ability to consistently and effectively negotiate
Level 3 with service providers. Having these guidelines provides a structured approach to negotiation, which
Guideline can improve the internal stakeholder’s confidence 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 organization’s
activities.

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.
Y 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 company’s
requirements; external consultants who can assist in translating those internal requirements into the
service provider’s 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.


Y 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 specific
provisions of the agreement and commitments made during the negotiating process.

Y 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.


Y 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) v1.1 229

2. Define the decision-making rules to be used during negotiations.

a) Identify the negotiation approach to take for each type of service.


Y Negotiation approaches may vary considerably between services and industries. Some services may have
few negotiation issues, with service options and prices being predefined. Other services may be very
complicated and be able to be tailored considerably to meet client organization needs. A defined approach
helps negotiators be consistent and have negotiation topics for each service prepared in advance.

b) Identify the constraints of the negotiation team.


Y 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 flexibility 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 provider’s standard contract.

3. Identify a set of negotiation topics.


Y 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. Define the organization’s position on the identified topics.


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

5. Define the organization’s approach for confirming existing conditions.


Y The organization’s approach may treat confirming existing conditions as a one-time negotiating or transfer
activity, or it could be designed to occur in multiple increments, leading to a final “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 confirming service level agreements and performance measures,


consistent with the organization’s service level management approach.
Y Refer to gov01, “Sourcing policy,” for guidelines regarding the organization’s service level management
approach.

c. Support the implementation of negotiations with service providers.

agr01
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 Sup-
port 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 CA PAB I LIT Y


LEV E L 2 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 str01
knw01 knw01
gov04
2. Involve relevant stakeholders in creating, improving, reviewing, and approving ocm02 ocm02
the work products and tasks as appropriate. knw01 knw01
gov04

3. Maintain and improve the work products and tasks as appropriate. knw01 knw01
gov04
val04
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. knw01 knw01
knw02
2. Provide resources to effectively perform the work. knw01 knw01
knw02
ocm03

3. Assign qualified personnel the responsibility, authority, and accountability to perform the work. ppl01 ppl01
ppl02 ppl02
ppl04
4. Communicate planned actions and their outcomes to relevant stakeholders. knw01 knw01
knw02

5. Verify that the work is consistently and effectively performed according to the str01 str01
work products and tasks. gov04

Carnegie Mellon University’s ITSqc is a multidisciplinary group of researchers, practitioners, and organizations Internal use: Permission to reproduce this document and to prepare derivative works from this document for
that addresses the needs of IT-enabled service providers and their clients. To that end, the ITSqc develops quality internal use is granted, provided the copyright and “No Warranty” statements are included with all reproductions
models and qualification methods for organizations involved in eSourcing. The eSCMs are sets of complimentary and derivative works.
best practices that are fast becoming the standard for sourcing relationships on both sides of the service External use: Except as permitted by Consortium agreements, requests for permission to reproduce this
relationship: service providers and clients. Organizations may be certified at one of five levels based on their use document or prepare derivative works of this document for external and commercial use should be addressed to
of, and adherence to, the best practices in these Models. the ITSqc Director.

Information Technology Services Qualification Center (ITSqc) No Warranty


Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3891 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
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University does not make any warranty of any kind with respect to freedom from patent, trademark, or copyright
Excerpted from Technical Report No. CMU-ITSQC-06-003 infringement.
Hefley, 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.

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