Page 289 - Global Project Management Handbook

14-14 MANAGEMENT OF GLOBAL PROGRAMS AND PROJECTS

● General specification and scope of work. Describes the scope of work, the technical
standards required, and administrative procedures to control.
● General conditions of the contract. Includes details about the agreement and related
issues such as bonds, safety, risks, and disputes.
● Special conditions of the contract. Additions required by any of the parties.
● Administrative and coordination procedures. Includes the procedural aspects.
The baseline of an outsourcing contract is quality and productivity. The contract must
include a definition of objectives, the structure of technology, historical data, scheduling,
and all the other factors that may affect implementation of the project. It should reflect
the size and time frame of the application and define standards as clearly as possible to
prevent ambiguity. The contract should be comprehensive in determining the specifica-
tion of the payment terms and responsibilities, revealing the perspectives of multiple par-
ties. It is important that all the parties should play a role and understand how changes in
the contract can affect their business processes. In addition to these basic principles,
international contracts need to state explicitly which country’s law will apply and specify
the language of communication.

Stakeholder Management. Outsourcing does not affect only the company; rather,
the society as a whole is affected. The primary stakeholders, such as employees,
employers, customers, and shareholders, experience the direct impact, whereas the
entire national economy is involved as well. In most cases, each party’s benefit is
contradictory to each other. Julius 18 studied the stakeholder conflicts in globalizing
businesses and categorized the stakeholders into four diverse groups: customers,
employees, communities, and shareholders.
Customers. The customers are always the primary stakeholders affected by changes
in a business structure. The consequences of an outsourcing initiation are promptly
reflected on the products as discount prices. However, outsourcing may not always result
in higher customer satisfaction. While customers use the benefits of low-priced products
and services, they also may face lower quality in products and inadequate service levels.
A quality discrepancy will result in disappointment and force the customer change the
product or shift to a different service. Thus it is important for a company to be in contact
with customers throughout the outsourcing process to assure the customers about the con-
tinuation of the quality in the products and services.

Employees. During the implementation stage, a company should not expect a
truthful support from all its employees. While employees understand the benefits of
outsourcing for shareholders and customers, they see their jobs being sent to low-cost
countries. The staff will not be willing to share knowledge if they know that their jobs
will be outsourced to another country. This prejudice may create problems during oper-
ational transfer, hindering the applications. A company can have a less painful transi-
tion by creating a more trustful environment for its employees. Training and education
will ensure an opportunity for existing employees to have more strategic positions, for
control and regulation of the future activities. If management can facilitate the realization
of such outcomes, the employees will be more enthusiastic about the transfer period.
Communities. As unemployment rates rise, outsourcing is subject to more argu-
ments in the United States. On one side, consumers cherish the increasing purchasing
power resulting from lower prices; on the other side, a growing percentage of the popu-
lation is losing job and social security. Many fear the rise of China. In order to avoid
dispute, companies are reluctant to announce their outsourcing decisions, whose conse-
quence in many cases include loss of goodwill and trust.
Shareholders. Shareholders are perhaps the largest group favoring outsourcing deci-
sions. Cost reductions make profit expectations higher, and downsizing the company,