Alsbridge Reveals Five “Gotchas” When Negotiating an Outsourcing Contract

Award winning benchmarking, sourcing and transformation advisory firm, Alsbridge, releases a new report 5 ‘Gotchas’ When Negotiating an Outsourcing Contract, revealing  five key areas to look out for during outsourcing contract negotiations. This report is a hands-on guide for organizations entering into outsourcing contract negotiations, helping them achieve maximum ROI. 

Alsbridge claims, these five areas of contract negotiation, if not carefully structured, can drain value from your business case and decrease the probability of having a successful and sustainable outsourcing agreement:

1. Statement of Work - Because the SOW is the "meat" of what the provider will do for you, you need to ensure it fully describes the services you expect from the provider.
2. Service Levels - It is important that the service levels reflect what you need even as you are negotiating price.
3. Termination Language -. Depending on your starting point, some "give" might be acceptable, but you first need to understand the ramifications if you need or want to get out of the agreement (or pieces of the agreement) in the future.
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 -. There are many risks associated with movement of work from one team to another, much less from one country to another. Because of the potential impact to your business, you want to make certain that you have some sort of approval authority prior to the movement of support functions.

Alsbridge CEO, Chip Wagner says, “Negotiating a successful outsourcing contract involves much more than just achieving the pricing you desire.” He adds, “While reducing cost is typically the primary value proposition for outsourcing, you also want an outsourcing contract 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.”

There are variations and complexity inherent in each deal and paying close attention to these five potential “gotchas” at the time of an outsourcing contract negotiation can help organizations develop an outsourcing agreement that works well for both them and the provider.

To download the complete report go to 5 ‘Gotchas’ When Negotiating an Outsourcing Contract.

About Alsbridge Inc.

Alsbridge is a global consulting firm that provides data-driven sourcing advisory and benchmarking services for IT, Finance and Sourcing executives.  We’ve helped hundreds of companies reduce costs and get more value from their vendors.  Our experienced consultants leverage proprietary tools and information databases to identify and engage the optimal vendors for your situation, negotiate best practice terms at fair market prices, and improve the way you work with your vendors.  Alsbridge clients utilize the most cost effective and value added sources globally for IT infrastructure services, hardware and maintenance, network services, software and maintenance, application support and development, business processes and cloud services. Alsbridge was ranked the #1 outsourcing advisor in the world by the International Association of Outsourcing Professionals (IAOP) based on the value delivered to clients.  This commitment to delivering value to our clients has made Alsbridge a distinguished member of the 2010 Inc. 500 fastest growing privately held companies in America.