Microsoft Outsources Contracting to Fargo?

Here at Global Legal I have been preaching about making the right preparations for a successful LPO relationship between clients and vendors, seemingly forever.  In an early post (Culling the List of LPO Vendors) I mentioned the Red Bridge Strategy methodology for Evaluating Legal Process Outsourcing (LPO) Providers which includes a step to design an applicable service delivery model.  More recently, in commenting on British Telecom’s decision to transition its captive legal services operation to UnitedLex, I noted that transformation and innovation, as opposed to pure labor cost arbitrage, are becoming important factors in deploying legal process outsourcing.  I even suggested that interactions between LPO clients and vendors should be relationships instead of transactions (Working with LPO Vendors: Relationship or Transaction?).  So, when I read the Integreon press release, I wondered if Microsoft had undertaken a structured approach similar to what I’ve advocated, and how it resulted in outsourcing contracts to Fargo, North Dakota. 

With this in mind, I spoke to Lucy Bassli, a Senior Microsoft Attorney involved in the decision, about outsourcing contracts to Fargo.  She explained how Microsoft had previously “templatized” the contracts process, documented it, and applied six sigma techniques to make it more efficient and reduce errors.  In doing so, Microsoft had reduced the overall level of legal expertise required to manage a large pool of contracts.  They then decided they could better utilize their highly capable contracts staff by offloading the simplified work to a vendor.  However, even after simplifying the process, they still didn’t just “throw it over the wall.”  They decided that it would be less risky to outsource a subset of their vendor contracts (significantly – not their client contracts), and to outsource them to a group that is one time zone away, and has American English (as opposed to British English or Indian English) drafting and communication skills.  She allowed that a further move to offshore is possible (a) if outsourcing to Fargo goes well, and (b) if the right offshore circumstances present  themselves.  Sounds like a thorough and logical process, no?

3 Responses to Microsoft Outsources Contracting to Fargo?

  1. John says:

    Doesn’t this work especially well for Microsoft because they have the size and clout in any contract negotiation to basically insist on their own terms? Would less rigid templates cost the process significantly in efficiency?

    • Thanks for your question John.

      Generally one party to a contract has more bargaining power than the other, and as a Fortune 35 company, Microsoft will often have that benefit because of the volume or potential volume of its purchases. The buyer typically has a bargaining advantage as well, and the contracts discussed above are “vendor” contracts where Microsoft is the buyer. However, companies assign differing values to the terms of a contract and often negotiate such terms as price, volume, delivery schedules, and liability limits by conceding one for another. As a result, individual contracts are often unique, even if the differences are small. Consequently, even for a corporation with significant buying power, contracts cannot be completely standardized.

      In general the more “rigid” (i.e. not subject to change) a contract template, the less effort it will take to review and approve it. However, contract template rigidity has to be balanced with the potential for lost business or the need for custom contracts in more circumstances than would be required with less rigid contracts.

  2. Microsoft’s clients are most likely in a very uneasy position since the tech market is literally monopolized by microsoft gadgetry. Contract templates are likely to become rigid and very imbalance given business distractions in the current economic trend.

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