Without a doubt, the enormous growth in the outsourcing industry spells o-p-p-o-r-t-u-n-i-t-y for a company that can offer service expertise and economies of scale. But just recognizing the opportunity and hanging out a shingle is not enough.
For those who have negotiated multiple outsourcing deals over the years, there is no question that there are indeed common problems and challenges faced in almost all outsourcing deals.
Negotiating Effective BPO Contracts: As the trend toward business process outsourcing (BPO) grows, companies are faced with a new learning curve. They need to understand the elements of establishing a successful BPO relationship, beginning with the proper contract vehicle, which can play a critical role in fostering the chances for success.
Outsourcing’s maturation as an industry has created a substantial body of experience in ‘renegotiating’ and ‘restructuring’ outsourcing contracts. Today, these transactions — sometimes referred to as re-do — are more the rule than the exception.
Strategic outsourcing — what does that phrase really mean? Discussions on the subject usually are focused on two things: structuring a strategic relationship with one or more outsourcers and the process by which the outsourcers are selected. Such discussions, however, overlook an important element.
Benchmarking Begins with the Contract. Continuous rapid change in technology that, in turn, drives changes in pricing and service levels dictates that the outsourcing customer have some mechanism for ensuring continuous improvement in its contracted pricing and service levels. Benchmarking is one of a number of tools used by outsourcing customers to maintain flexibility in their long-term outsourcing contracts.
Negotiating Effective Service Level Agreements (SLAs) (continued): SLAs are now part of outsourcing’s alphabet soup. In recent years, outsourcing consultants and lawyers have heavily emphasized the importance of including SLAs in contracts. That trend comes from experience gained when many customers learned that they had little ability to influence the outsourcer’s performance without an SLA.
Are you getting ready to negotiate an outsourcing contract? If so, place flexibility high on the list of negotiation goals. Many customers involved in long-term outsourcing contracts in the past have learned the hard way that the restrictive and static nature of normal contract terms can tie their hands in the rapidly changing outsourced IT environment.
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