Coming up with the accurate contract volumes and structure is extremely
important for a successful outsourcing contract, according to Alsbridge Inc., a
benchmarking, sourcing and transformation advisory firm. The firm today
released a report, “Keys to Driving a Successful Outsourcing Contract,” which
discusses the key aspects of any contract that can drive the initial
projections of savings and return on investment.
Chip Wagner, CEO, Alsbridge Inc., says, “If some or all of these aspects are not carefully thought out
and strategized, you can expect mixed degrees of impacts on the financial
benefits of your outsourcing contract.” The main aspects are:
• Resource's types and baselines
• Fixed and variable portions
• Unit rates
• ARCs/RRCs
• Dead bands
• Re-Negotiation points
According to the report, making sure that the base volumes are correct for the
life of the outsourcing contract will ensure accurate pricing and minimize
adjustments in the contract due to “change." While fixed and variable
components are a must for getting the “best price,” unit prices, that make up
the ARC’s (additional resource charges) and RRC’s (reduced resource charges) in
a contract, are the vehicle that enables both the client and service provider
to adjust the overall charges of the contract.
Further, the report suggests incorporating dead bands and renegotiation
bands in the outsourcing contract. Dead Bands minimize the billing complexities
of minor changes to the resources consumed. The rationale is that service
provider costs do not change significantly in order to respond to different call
volumes, as the service desk has some flexibility, and capacity built on the
model. The Renegotiation band is a point in the contract when the resource
volumes and charges from a service provider have changed significantly and may
begin to have an impact on the way the outsourcing contract was setup initially.
“Get the resource volumes right, both initially and over the life of the
contract, and this will be the major driver in achieving success,” says Dieter
Thompson, president Alsbridge. “Also, getting the variable portion right will
help to ensure that changes in volume are aligned with changes in your price.”
For further details, download the
complete whitepaper Keys to Driving a Successful Outsourcing Contract.
About
Alsbridge Inc.
Alsbridge is a global consulting firm that helps companies transform and
optimize the way they purchase, manage and leverage technology and business
processes. We have over 200 team members on 3 continents serving
over 200 clients a year including more than 40% of the Fortune 500.
Alsbridge has 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 service providers. Alsbridge clients utilize the
most cost effective and value added sources globally for IT infrastructure
services, network carrier services, hardware and software, application support
and development, business processes and cloud services.
EDITORS/WRITERS: Journalists interested in covering the
above topic or interviewing one of our SMEs please contact:
Scott Tims
Office: 214-378-7970 ext. 278
stims@thepointgroup.com
www.alsbridge.com
