Global sourcing advisory and benchmarking firm,
Alsbridge, Inc., today released a report showing that over the life of the agreement a typical outsourcing contract loses 40 – 70 percent of the value indicated in the original business case.
“It is a well-known and documented fact that outsourcing provides access to a broad range of benefits including the realization of improved efficiency, speed and agility to deliver services,” says Alsbridge CEO, Ben Trowbridge. “However, the ability to sustain high value realization over the complete life cycle of the outsourcing agreement is a major challenge.”
According to the report there are a number of factors that lead to what the firm refers to as “value leakage” including the inability to achieve efficiencies through key operating metrics and service level agreements, nonperformance in innovation deployment and in the use of emerging technologies and non-compliance to regulatory requirements or client expectations resulting in the inability to support goals and objectives.
Alsbridge suggests there are several warning signs of value leakage that client organizations should regularly assess:
• Lack of fact-based information for resolving issues between client and provider
• Contractual terms and governance processes that do not fit current operating requirements
• Questions surfacing about the wisdom of the sourcing strategy or original rationale for the sourcing decision
• Provider or service center status reports showing green but the relationship still feels red
“By monitoring and preventing value leakage throughout the duration of the contract, both the client and provider can keep costs to expected levels while continuing to improve service performance,” Trowbridge concluded.
For more examples of how to recognize and prevent value leakage in your outsourcing contract,
access the full report here.
About Alsbridge Inc.Alsbridge provides world class sourcing advisory and benchmarking services for IT, finance and sourcing executives. With over 150 consultants located globally, 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. Our 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.
