Contract Renegotiation: Are you Missing Something?

man wearing a suit sitting in a table showing a contract and whe

Lores Schwind, Director ·

For a client organization, the end of an outsourcing contract term always brings with it the renew/renegotiate/repatriate quandary and its myriad options and considerations. Are we getting a good deal? Can we do better? If we can do better, is it worth the disruption of finding and bringing in a new provider?

In today’s rapidly changing marketplace, the choices are more complex than ever – and the stakes are higher than ever if you make the wrong decision.

For one thing, ongoing technology innovation and stiff competition are exerting steady downward pressure on IT services. This means that a deal that was competitive as little as six months ago may now be significantly out of sync with the market. Moreover, in addition to evaluating how much, say, storage costs have dipped since your last contract, you now have to consider the potential risks and benefits of moving your storage to a cloud platform, versus staying with existing technology. In other words, it’s no longer enough to compare the apples of six months ago to the apples of today; now it’s about normalizing and comparing the apples of existing technology against the oranges of moving to a new technology. And, speaking of new technologies, the game-changing specter of Robotic Process Automation is on the horizon and is already having an impact on the pricing of outsourcing contracts.

In this environment, benchmarking existing operations against market standards is more important than ever to an end-of-contract strategy. The good news is that the growing automation of data collection and analysis tools, as well as heuristic models that enable projections of future scenarios, have greatly enhanced benchmarking capabilities. As a result, today’s benchmarks are increasingly agile, cost-effective and adept at rapidly assessing multiple alternative options over time.

But end-of-contract considerations today go far beyond issues of pricing and technology platforms. Industry-specific expertise is becoming increasingly important to client organizations in all sectors. Consider banking, where regulatory compliance and supplier oversight across the entire service delivery chain has become a critical priority. Here, the end of a contract term offers an opportunity to assess the provider landscape – have new players emerged who have the requisite expertise and can demonstrate success at navigating the regulatory landscape?

From this perspective, the end of a contract term needn’t be confined to the details of pricing and service delivery, or to an assessment of technology options, but rather can encompass a high-level review of business strategy and operational requirements. Signing on for more of the same and hoping for the best is not an option. The world is changing too rapidly for that.

2 thoughts on “Contract Renegotiation: Are you Missing Something?

  1. damoconsulting

    good points. I just finished a major contract renegotiation with a healthcare client, and the point you make about using benchmarking data in industry vertical contexts is very true.

  2. Pingback: End-of-Contract: Don’t Let the Cloud Opportunity Drift Away | Inside Outsourcing, Benchmarking and Transformation

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