Alsbridge Unveils Warning Signs Of Troubled Outsourcing Agreements |
(DALLAS, Texas) June 4, 2010 - Alsbridge, Inc., an award-winning global advisory firm that redefines the way companies reduce costs and improve back office operations, today unveiled its Top Six Warning Signs of Troubled Outsourcing Agreements.
"By considering these warning signs of a troubled outsourcing agreement, companies can quickly recognize if they have one or more outsourcing contract that is no longer meeting their needs and can seek to rectify the situation before there is any negative impact," said Ben Trowbridge, Alsbridge CEO.
1) Age of the Agreement
Outsourcing agreements are typically multi-year contracts ranging from three to five years in length, with some of the older ones going to ten years. Good outsourcing agreements are designed with flexible terms and governance processes to handle changing conditions, yet even flexible agreement terms can become outdated before contract expiration. In the last few years, legal provisions have changed in the areas of data privacy, data security, and service provider financial covenants. So there may be obvious modifications that should be made to improve the contract for both of you long before the contract terminates.
2) Changing Business Conditions
Business conditions may have changed considerably since the outsourcing agreement was signed. The firm might be smaller and need fewer services. The company's business model may have changed, so lower levels of service (e.g., lower priority service) at lower costs might be acceptable, or maybe the company can pay more for a higher level of service. Review the contract for these types of adjustments.
3) Higher Costs
Costs may be higher than anticipated due to unforeseen consumption, incomplete transformation or a misunderstanding of contract scope. Perhaps the company can control some of these issues through streamlined technology, improved training or other methods. If high costs are due to misunderstanding of contract scope, a discussion with the outsourcer may resolve the situation. Regardless, market conditions and pricing have changed for many firms. So consider today's "market price" for each outsourced service.
4) Lack of Innovation/Thought Leadership
While "innovation" and "thought leadership" may have discussed during initial negotiations, often these expectations and commitments are not effectively described in the outsourcing agreement. Companies should review outsourcing contracts for these types of commitments, and then insist the outsourcer meet these requirements. A third party advisor such as Alsbridge is keenly positioned to assist clients and service providers to navigate through this process.
5) Relationship Disconnects
The relationship with the outsourcing provider will change over time. The account manager for the agreement, the person who best understands the background and intent of the contract may take another position. The new account manager may interpret the contract differently. Additionally, reorganizations, mergers and acquisitions can cause realignment of outsourcing firm executives, meaning lost synergies that may be difficult or impossible to re-establish.
6) Provider Personnel Changes
The provider's personnel, especially those that sit on site and regularly interact with a firm, are essential to ensuring the success of the outsourcing agreement. Some may have previously been with the firm's IT organization. Others may be covered under a key personnel section of the contract, which gives you some say in if, when and how these folks move on to other opportunities. However, others may be moved to different positions, removing them from the relationship with the contracting company.
About Alsbridge
Alsbridge, Inc. is an award-winning global advisory firm that has redefined the way companies reduce costs and improve back office operations. Our proprietary benchmarking tools and data resources enable clients to utilize the most cost effective and value added sources globally for information technology, business processes and telecommunications networks.Through a combination of internal optimization and outsourcing, our clients achieve cost savings that support their strategic business objectives.
Foundedin 2003, Alsbridge is the proven, effective difference. The company's web site is: www.alsbridge.com. |
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