Five Things to Watch for During Outsourcing Negotiations

DALLAS, Nov. 2, 2009 – Outsourcing is typically about reducing costs, however you also want an outsourcing agreement that allows you to realize your immediate and long-term delivery needs, provides contract flexibility and ensures that you receive maximum value for the money you will be spending, according to an article, Five “Gotchas” When Negotiating an Outsourcing Agreement, in the online journal of sourcing topics, Outsourcing Leadership.

There are areas of the sourcing agreement, if not carefully structured, that can drain value from your business case and decrease the probability of having a successful and sustainable outsourcing agreement.

Alsbridge warns about these five elements during negotiations:

1.      Statement of Work – A Statement of Work (SOW), when created correctly, describes in great detail the services to be performed by the provider and also clarifies certain client responsibilities. 

2.      Service Levels – Service levels work in conjunction with the SOW to scope the services that the provider will deliver.

3.      Termination Language – It can be hard to focus on termination language and termination charges at the beginning of an outsourcing relationship.

4.      Future Pricing – There are a number of factors to consider regarding future pricing.  On the whole, you should expect your IT costs to go down over time due to improvements in hardware and software functionality and pricing, labor arbitrage, automation, and so forth.

5.      Delivery Locations – In return for hitting your price point, a provider may want to include the freedom to deliver from whatever location they see fit. 

For the original Alsbridge thought leadership article, visit http://www.outsourcingleadership.com/knowledgebase/articles/five-gotchas-when-negotiating-an-outsourcing-agreement. 

Outsourcing Leadership released its first November issue highlighting the sourcing business case. Subscribers can also access Outsourcing Leadership’s on-demand eSeminar: A Sourcing Business Case the CFO Can Understand to learn more about creating a strong business case.

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For more information on outsourcing advisory services, contact Alsbridge at 214-696-6410 or visit www.Alsbridge.com.  For research and insight on outsourcing, visit www.outsourcingleadership.com

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About Alsbridge:

Alsbridge is an award-winning global advisory firm providing unparalleled expertise in information technology and business process outsourcing, shared services, finance and accounting, and benchmarking. The firm is fact-based and client-focused, with a proven methodology that fosters success. Alsbridge defines client goals and scope, finds the best cultural fit with providers, refines the best solutions and eases transitions and implementation. Founded in 2005, Alsbridge is the proven, effective difference.