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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.

Why do customers and suppliers often mutually characterize their outsourcing relationships as adversarial? The single biggest reason is a failure by both parties to distinguish between legitimate disagreement and discussion, on the one hand, and improper and harmful dispute, on the other.

On January 1, 1999, eleven member countries of the European Union (EU) will adopt the Euro as their common currency. This move has complex implications for outsourcing in Europe. It will affect existing and new contracts and, more fundamentally, have an impact on the market structure.

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.

Since the late 1980’s, outsourcing vendors have relied on subcontractors to perform part of the work required in outsourcing relationships. Although customers often assumed that the functions subcontracted were non-critical services, a number of trade press articles a few years ago revealed that the outsourced functions included some that any client would view as potentially at the heart of the relationship.

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.