Tag Archives: outsourcing contract

EU Network Strategy: Don’t Delay Mobile Consolidation

Margot Wall Blog2

Margot Wall, Managing Consultant – 

Recent moves by the European Community (EC) have opened up the competitive landscape and created opportunities for global enterprises to consolidate network operations in EC countries.  Mobile operations are especially promising, and we’re seeing a number of client organizations move forward with plans to consolidate and rationalize plans from multiple carriers.

At the same time, other enterprises appear to be content to wait until their existing mobile contracts expire before taking advantage of these emerging market opportunities. That would be a mistake. The time to start a consolidation initiative is now, even for organizations with a number of contracts still in force.

Consider: With multiple countries and multiple in-country teams, and with at least one provider in each country, getting a consolidation deal to market – and then getting to contract – both take longer than you might expect.  If you wait between 6 and 18 months to go to market, by the time you’re done with the project another 8 to 18 months has gone by – and now your rates are more than three years old.

However, by going to market now, by the time you’ve signed new contracts the old agreements you were waiting on to expire are ready to migrate to the new deal, instead of sitting at the old rates. Bottom line – you save money sooner.

We’ll be discussing network and telecom issues, contracting strategies and the European marketplace at the 2015 Alsbridge European Vendor Summit, to be held May 19th in London.

Contractual Discipline – a Financial Services Imperative

Photo of Wooden file cabinet

David England, Director

“The best contract is the one you never have to pull out of the drawer.”

That adage describes the idyllic sourcing relationship of old – one built on trust, open communication and aligned objectives. In such an environment, specific contractual terms and obligations rarely need to be called upon, since both sides understand their roles and are committed to success.

While a nice sentiment, the idea that detailed scrutiny of contracts needn’t be a top priority is rapidly becoming a dangerous anachronism. This is especially true in the Financial Services sector, where increasingly rigorous regulatory requirements are raising the bar of third-party risk management to unprecedented heights. In today’s environment, any bank or other financial institution that fails to rigorously document its contractual obligations regarding supplier oversight and compliance, and to thoroughly demonstrate its due diligence in ensuring that those obligations are met, faces the prospect of significant fines and penalties.

Anyone who doubts that the stakes are high should refer to Bulletin 2013-29 from the Office of the Comptroller of the Currency (OCC), which states that a “bank should adopt risk management processes commensurate with the level of risk and complexity of its third-party relationships.”

What that ultimately means is that banks must demonstrate adherence to regulatory standards and are liable for risks occurring at any point throughout the entire sourcing lifecycle. All information associated with the relationship must be captured, documented and accessible to regulators to ensure due diligence and compliance at each phase.

Three key issues raised include:

Pre-contracting documentation: Under emerging guidelines and standards, all activity occurring before a contract execution must be captured, documented and accessible. Specifically, communications during initial planning, RFP development and provider evaluations are subject to regulatory scrutiny to ensure that evaluations of suppliers were properly conducted.

Organizational communication: The contracting process typically involves multiple organizations – IT, vendor management, compliance and audit, for example. Seamless handoffs are imperative, but in most enterprises, standard contracting review processes either don’t exist, are imperfect or are rarely observed. This increases the risk that one department will mistakenly assume that its rigorous compliance processes are followed by other departments. The result is actions slip through the cracks. Rigorous oversight of contracting practices across business units is therefore imperative.

Prioritization: The contracting process creates a Pandora’s Box of potential compliance violations. Simply identifying and addressing them haphazardly will lead compliance teams down a series of gopher holes. While this approach will extinguish ad hoc sparks of risk, unattended bonfires will likely be blazing elsewhere. Standard, disciplined approaches are needed to identify risks and rate them by various criteria, such as likelihood and scale of monetary, brand and customer impact.

Bottom line: the notion that rigorous oversight of specific contractual terms is secondary to a relationship of trust – if it was ever true in the first place – is no longer valid. Today, trust and innovation must be built upon a foundation of contract discipline that clearly defines, specifies and verifies mutual obligations from the outset of the relationship and throughout the sourcing lifecycle. Without that foundation in place, clients and providers place themselves in significant peril.

Put differently, a contract that’s been sitting in a drawer for several years will lead to some very unpleasant surprises when the regulators come calling.

13 Insightful Questions to Ask in Your Outsourcing Business Case

One of the toughest jobs in outsourcing is tracking the impact various changes may have on your outsourcing business case. Knowing what these changes are and how to best manage them will make a meaningful difference on your business case. The latest report by Alsbridge spells out thirteen questions that outsourcing buyers need to ask in their outsourcing business case in order to be better prepared for the potential changes and hence have a more successful business case.

“What happened to the savings promised in your outsourcing business case?” is a question that is often raised by the higher management, twelve to eighteen months post signing the outsourcing contract.  In order to ensure you have the right answer to this question, you should anticipate any potential changes in your outsourcing business case by proactively asking questions related to the following areas:

  1. Addressable Costs
  2. Inflation rate
  3. Foreign Exchange Rate
  4. Growth Rate
  5. Corporate Overhead
  6. Retained Staff
  7. Downsizing
  8. Transition
  9. Provider Under Bid
  10. Pent up Business Demand
  11. Inspecting Invoices
  12. Contract Obligation and Delivery Management
  13. Rebadging and On/Offshore Mix

The outsourcing business case should include the financial impact from any clauses that were agreed to in negotiations that would alter your updated outsourcing business case as well as methodically taking into account any changes in assumptions that would have material impact on your bottom line.

There are a number of actions and forces – some you can control and others you can’t – that can significantly alter the savings, quality improvements, and capability uplift you planned to achieve in your outsourcing contract. Knowing what these changes are and how to best manage them will make a meaningful difference on your business case going forward.

Rarely do we ever find an environment totally static. Therefore to be better prepared for tackling the potential changes affecting your outsourcing contract, ask the above 13 questions in your business case. For complete details on these questions, download the full report 13 Insightful Questions to Ask in Your Outsourcing Business Case.

More than Half of the Outsourcing Buyers Miss Out on the Value Generated from Benchmarking Agreements – Alsbridge Report

In response to the ever-changing outsourcing market  prospective and current buyers of outsourcing services are finding benchmarking vital not only to managing pricing, but also to improving their relationships with their providers, identifying best practices, engaging in continuous improvement, and driving innovation.

Alsbridge released a new report- Benchmarking in Outsourcing: Keys to Driving Long-Term Value, which describes how benchmarks go beyond simply uncovering misaligned pricing and services. Benchmarking in outsourcing has evolved from a single-focused pricing comparison into a richer, broader array of tools that is being increasingly used by both buyers and providers to improve the process, the relationship, and ultimately the outcomes.

Although benchmarking is becoming more common and accepted, it’s still far from ubiquitous. In a recent poll, Alsbridge found that nearly a quarter of respondents were not making use of benchmarks at all, and another third were taking advantage of them at comparatively infrequent intervals – every three-plus years. It was also found that more than half of buyers of outsourcing services (and perhaps even providers) are missing out on significant opportunities to gain insight into the key points of contract value.

In the wrong hands, benchmarking can be a difficult process, even if all parties go into it with open eyes and positive expectations. Every benchmarking effort must be carefully considered, well-planned and effectively executed in order to produce a meaningful, actionable outcome. The report discusses in detail the following benchmarking best practices:

  • Context is required
  • Be prepared for the unexpected
  • Carefully consider all inputs
  • Use the right benchmark
  • At the right time
  • Use the benchmark as a relationship builder

Employed carefully and properly, the value generated by actionable benchmarks can drive significant return in performance, cost reduction, innovation, injection of industry best practices and continuous process improvement.

For further details the complete report can be downloaded here.

Misaligned SLAs Could Lead Enterprises to the “Seeing Green But Feeling Red” Trap

Without the proper alignment of IT service levels to the needs of the business, companies can fall into the trap of “seeing green but feeling red,” meaning that the service level measures are exceeding their targeted performance levels yet there are still IT delivery issues. The latest report by Alsbridge- 4 Basic Measurements to Aligning SLAs to the Outsourcing Contract- provides a good framework to evaluate the service levels companies are currently using or are developing as part of an outsourcing contract.

When negotiating a new outsourcing contract, clients face the challenge of determining the service levels that are most meaningful to the business. The intent of a service level agreement (SLA) is to measure the provider’s overall performance by virtue of concise, unambiguous metrics with targeted levels of performance that are easily understandable by the client community and are simple to validate from a client’s perspective.

As the outsourcing industry has matured, providers have developed a multitude of service level measures that they can propose to their clients in an outsourcing contract – some more relevant to the client’s business than others. Chip Wagner, CEO, Alsbridge Inc., says “Without the proper alignment of IT service levels to the needs of the business, companies can fall into the trap of “seeing green but feeling red.” “Fortunately, there are several common service levels within the outsourcing marketplace that align nicely to the perception of lines of business and end users,” adds Wagner. The report by Alsbridge throws light on four basic metrics that can serve as a guideline for defining service level requirements, including:

  1. Service Desk
  2. Projects
  3. Change Management
  4. General

“When dealing with an outsourcing contract, there are literally hundreds of “typical” IT metrics that can be reported on,” says Dieter Thompson, president, Alsbridge Inc., “While true that some IT-specific metrics should be in place, most should have a focus squarely on measuring the delivery of services to the end users.”

For further details access the complete report 4 Basic Measurements to Aligning SLAs to the 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.

Right Resource Volumes- The Key Aspect of Successful Outsourcing Contract, Reveals Latest Report by Alsbridge

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.

Alsbridge to Share Insights on Contract Expiration and End-of-Term Sourcing Strategy

Alsbridge to deliver an eSeminar Your Contract is Up: Now What?

(Dallas, Texas) August 21, 2013 – Award winning benchmarking, sourcing and transformation advisory firm, Alsbridge, Inc. will share valuable insights on contract expiration and end-of-term outsourcing strategy through its eSeminar Your Contract is Up: Now What?, on August 22, 2013, 1:00 PM to 2:00 PM ET.

Tom Glueck, Director at Alsbridge, will hold a discussion on creating an effective end-of-term outsourcing strategy, using an approach that has been successfully deployed for many of Alsbridge’s clients.
Attendees of this eSeminar will get answers to the following pressing questions:

  • What to do if your outsourcing contract expires in less than 30 months?
  • What are the options available to you?
  • How to renegotiate for a market competitive outsourcing contract?

The expiration of an outsourcing contract can be either a huge dilemma or an immense opportunity, according to Glueck, who says, “Contract expiration is only a dilemma if you don’t give yourself enough time to consider all of the options available to you and create a plan for moving forward.”

“The ‘end-of-term’ represents a significant milestone for which the next outsourcing strategy must be developed” says Glueck. “The outsourcing strategy must apply the lessons learned from the current outsourcing contract and relationship, to position the client to achieve its future business objectives. A looming contract expiration date rarely simply means the contract has reached its ‘end.’ ”

Join Tom Glueck and learn how contract expiration can be a great opportunity to improve services, lower costs and more effectively respond to business needs if you implement a viable sourcing strategy.

To register for the eSeminar go to Your Contract is Up: Now What? eSeminar Registration Page.

Space is limited so reserve your complimentary seat now.

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.

Alsbridge Reveals Five “Gotchas” When Negotiating an Outsourcing Contract

(Dallas, Texas) August 13, 2013 — 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. 

Alsbridge to Share Insights on Developing Your Sourcing Strategy upon Contract Expiration

(Dallas, Texas) April 16, 2013 — Award winning benchmarking, sourcing and transformation advisory firm, Alsbridge, Inc., today announced that it will be delivering an eSeminar “Contract Expiration: What is Your Sourcing Strategy?” on April 18, 2013, 12:00 PM to 1:00 PM ET.

The expiration of an outsourcing contract can either be a dilemma or an opportunity. It is a dilemma if you don’t give yourself enough time and don’t fully consider your options. However, it can be a great opportunity to improve services, lower costs and more effectively respond to business needs if you implement a viable sourcing strategy.

Over the past 10 years, Alsbridge has earned the trust of many of the world’s most recognized companies, wanting a competitive-edge for their business outsourcing strategy, helping them reduce costs, improve operational performance, and leverage innovative approaches to solve simple or complex sourcing objectives. 

  • Does your outsourcing contract expire in less than 30 months?
  • Do you want to understand your sourcing options, going forward?
  • Do you want a market competitive agreement, even if you renegotiate?

 If your answer to one or more of the above questions is yes, then join Tom Glueck, Director, Alsbridge Inc., for an eSeminar as he shares useful insights on developing your sourcing strategy that will help you achieve unparalleled results.

 This eSeminar will provide important information for CIOs, CFOs, CPOs, Sourcing Executives, and Vendor Management Executives.

To register, go to the eSeminar registration page. Please remember space is limited, so reserve your complimentary seat now. 

 About Alsbridge Inc.

Alsbridge provides world class sourcing advisory and benchmarking services for the CIO, CFO and CPO.  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. 

Alsbridge Reveals, How To Beat The Benchmark Clause

Award winning benchmarking, sourcing and transformation advisory firm, Alsbridge, Inc., today released a report on “Beating the Benchmark Clause.” The report elucidates the considerations for benchmark best practices that have stood the test of time and are critical to vendors and clients alike.

Benchmark clauses have long been included in outsourcing contracts as a way to ensure the agreement remains competitive over time.  “When structured properly, a third-party clause provides clients with a unilateral right to test the outsourcing contract against the market to ensure that it is competitive,” says Ben Trowbridge, Chairman and CEO, Alsbridge Inc. “This allows for clients and vendors to sign longer term contracts, thereby creating greater relationship stability for both the client and the vendor.” So what should be contained in a benchmark clause?

Based on extensive experience, Alsbridge recommends the following elements be considered when developing a third-party benchmark clause. These elements have stood the test of time – vendors and clients alike have found these elements to be critical:

  • Timing: The only constant in business today is change. Businesses’ needs evolve, as do vendor capabilities.
  • Scope: If possible, the clause should provide a right for the client to benchmark all or some towers.
  • Flexibility: Be sure to provide flexibility for a benchmark approach that matches current market approaches.
  • Behavior-Changing Strength: Make sure the clause has teeth. Require that some specific action must be taken when the benchmark result proves that the market price is lower than the vendor’s price.
  • Contract Total Value: Consider benchmarking beyond price. Evaluate other elements of the outsourcing contract.
  • No TBD: Including a vague and generic benchmarking clause in the sourcing agreement at the last minute sounds like a good idea, but it can be self-defeating.
  • Benchmark Lite: Consider a provision for a “pre-benchmark” as a step prior to executing a full third-party benchmark.

In addition, there are other elements of the transaction that should be evaluated on an ongoing basis.

Instilling a benchmarking approach that goes beyond price as an ongoing management practice provides a 360-degree view of outsourcing contract alignment for both the customer and the provider. In this regard, benchmarking can pinpoint areas where strategic opportunities may exist to increase the value of the agreement for the customer without having to change the vendor’s price.

To know more about the above Benchmarking Best Practices, you can download the complete report Beating the Benchmark Clause

About Alsbridge Inc.
Alsbridge provides world class sourcing advisory and benchmarking services for the CIO, CFO and CPO. 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.