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: All outsourcing relationships are adversarial in nature because vendors want to be paid as much as possible for delivering as little service as possible, while customers want as much service as possible for as little money as possible. That, in a nutshell, is how Dean Davison, analyst, Meta Group, sees the industry.
Mention multi-vendor outsourcing relationships these days, and the J.P. Morgan/Pinnacle alliance bubbles up in every conversation. That alliance, said Alan Gonchar, president, COMPASS America, Inc., has become the model for a growing movement toward teaming.
While the glamorous multi-vendor deals are the ones garnering most of the attention in outsourcing, the real growth in that area will come in the less sophisticated arrangements. That’s the opinion of Bill Martorelli, an industry analyst formerly with Giga Information Group.
The proliferation of outsourcing is just phenomenal across types of activities, across industries and at every level of the organization.
Outsourcing as a management tool will continue to be actively employed. Today, if a manager doesn’t look at all the ways of obtaining resources to do the best job for the company, he’s not doing his job right.
The benefits of outsourcing traditionally have been described in financial terms. With progress, however, cost reduction benefits have become ‘table stakes’ as even more significant advantages are realized from outsourcing partnerships. Leading organizations have discovered that in addition to cost benefits, outsourcing presents an opportunity to improve the level of service.
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.
Ah, the honeymoon stage of a business relationship, that early stage when everyone is enthusiastic, when you envision benefits that will continue to multiply, when you celebrate each small increment of success. You’re focused on the objectives of the agreement. You talk frequently. You nip and tuck and shape exactly the relationship you know you need.
Culture shock. That’s not something most would expect conservative icon Rolls Royce to embrace, but that’s exactly what the company sought in its outsourcing relationship with EDS.
Outsourcing in the traditional sense a way for companies to save money is changing. The clients I talk with now view outsourcing, or some form of it, as a viable option to not only saving money, but to actually help them improve their competitiveness.
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