By Kirk Laughlin, Editorial Director

One of the most heated, contentious and downright uncomfortable  places outsourcers and their customers frequently find themselves is on the battleground of contract negotiations.  Ever been part of one of these slugfests?

More than a few smart people in this industry have observed the sheer insanity of a customer beating on the head of a service provider while blissfully lacking recognition that the drive to lower cost may well have a direct impact on the quality of service delivery back to the customer. Outsource providers may have ruled the day ten years ago during the early growth years of the industry, but the pendulum has swung the other way in recent years, explains Richard Sandler, Vice President of Contracts for CSC’s Managed Services Sector, who has  global responsibility for Contracts Management of all of CSC’s commercial outsourcing accounts.

I spoke to Richard recently about how much both sides of the outsourcing relationships are identifying innovation as a key goal on the roadmap toward a sustainable, fulfilling engagement. Sandler says that the “procurement mentality” still reigns in many customer organizations, pointing out that this approach can be quite damaging in the services sector where high value strategic contributions and mindshare are,  in the end, what the end customer or business unit is really looking for. “The only way they can relate to procurement is to beat down on the vendors,” says Sandler. “For suppliers like us, we have a global infrastructure. It behooves both companies to work in a non-adversarial way.”

Yet there is hope on the horizon says Sandler who is seeing more of a universal effort to promote the pursuit of collaboration. “There is definitely trend to come up with a collaborative, non-adversarial negotiating.”

As a $17 billion global IT services firm that does business in more than 90 countries around the world, CSC is acutely aware of the need to build contracts that enable innovation. The provider acquired BearingPoint’s Brazil operations (and about 550 employees) last summer and already had operations in Argentina, Brazil, Chile, Colombia, Costa Rica, Guatemala, Peru and Mexico.

Getting clients to depend more on the provider for strategic input involves a “leap of faith” for some customers who at some point have to face the critical question of whether to bring the customer “into the tent,” explains Sandler. He says relationships work best when four key tenants are maintained: Trust, Credibility, Collaboration and Good Governance.

(Lee Coulter of Kraft points to the need for establishing an innovation roadmap as part of a sound governance program in an earlier NSAmericas post.)

But what about SLAs and metrics to measure the effectiveness of service delivery? Sandler’s response:  SLAs don’t drive the business needs of the client. We need to help a client get gold out of the ground.”

The increased use of new computing and storage models, including cloud computing and virtualization, are testing the limits of what most CIOs and IT leaders are comfortable sending out of their own environments. As a result, these decision makers have to be increasingly decisive about which applications are “core” and which applications are more appropriate to be managed by outsourcing providers.

Sandler says CSC is deeply commited to cloud computing and is seeing strong demand for IT infrastructure outsourcing, which includes managing business critical applications and processes.

Related posts:

• Kraft’s Coulter Says Don’t Expect BPO Partners to be Innovation Leaders
• Nearshore Americas: Sourcing in Real Time
• Nick Carr: Dark Skies Ahead as Cloud Computing Hurts Global Services Players
• The Top Ten CIO-Driven Sourcing Trends for 2010
• IAOP and Nearshore Americas Partner to Drive Visibility of Americas-based Sourcing