The fact that Sprint Nextel has decided to sue IBM over a computer programming outsourcing contract gone bad says a lot about the complexity of outsourcing relationships.

What veteran outsourcers know and what those new to the practice quickly learn is that selecting a service provider is only half the battle toward a winning contract. Just as important are thinking through the multiple financial and operational scenarios that may arise throughout the life of the relationship and agreeing on the metrics that will be used to calculate the relevant outcomes.

The tripping point in the Sprint IBM relationship was the productivity gains that were expected from the outsourcing service contract. In its legal filing, Sprint alleges that IBM fell 119,000 hours short of the 6.4% productivity improvement called for, and that Big Blue should pay up $6.4 million as a result. What’s interesting here is that the legal arguments may hinge on the formula used to calculate the productivity figure. Sprint says the formula was agreed upon in the contract. According to published reports, IBM says Sprint is using an incomplete formula.

There may be no such thing as an airtight contract, but this suit is a reminder that making every effort possible to establish clear metrics at the outset can make for a much happier and productive relationship. — Suzanne Stevens

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