Reasons Why CIOs Look Forward to Re-negotiating Outsourcing Contracts

With the needs of business (as well as new technologies that support them) evolving rapidly, short-term outsourcing contracts are no longer viable. It’s one reason why companies are advised to re-vamp their outsourcing contracts not only to access other options, but to also dramatically cut down on costs.

There are 5 areas that companies should look into to unmask where their outsourcing contracts may no longer serve or fit them well.

1. Re-Solutioning

There are a plethora of ways to deliver IT services. One of them is through cloud computing. But utilizing autonomics (machines made to carry out human tasks) is also growing. Another trend is through the use of service utilities. These options will later make an impact in other industries.

2. Re-Sourcing

This is a good time to think about other providers that conduct specific or complete IT service by means of a which-breed-is-the-best method. Decades back, no one thought Microsoft, Amazon, eBay, or Google would be key players for today’s services. Nowadays, there are a number of big companies deploying varying business models and smaller firms with multiple offerings.

3. Restructuring

Companies should structure their outsourcing contracts not on levels of tech service, but on things that matter to business. The same goes for outsourcing. Such outcome-based approach allows IT providers and consumers gain better control over what they’ll be purchasing.

4. Retrofitting

Information analytics, mobility, and IoT are just some of the growing list of technologies considered to be important in placing any business in the market that may not be present in current outsourcing contracts.

5. Reconciling

This is the kind of recalibration that hasn’t really been implemented much in the course of an outsourcing contract. Consumers head back and re-negotiate current terms in area where performance or pricing are “out of the line” or where business requirements have improved or decreased.

There are potential impairments to revising IT contract s mid-stream. Some are just within a client network while others are purposely made for contract-based outsourcing. But these can be effectively handled.

Here are 4 ways to handle potential challenges when dealing with a mid-stream IT contract negotiation.

1. Management change

Outsourcing consumers and clients are already used to the status quo. If contract changes are made, fair effort should be done to handle the change in the work lives and process of people. Otherwise, new IT contracts will end up failing later on.

2. In-house talent availability

Today’s IT leaders need to figure out whether they’re capable of carrying out cost-efficient reviews to re-negotiate current contracts. If not, they’ll have to opt for other parties. When moving to a multi-sourced model, they’ll need to ensure they possess the required in-house skills to deal with the new model.

3. Negotiating current leverage

Outsourcing consumers need to figure out how to acquire and maintain their leverage. How they can deal with that will entirely depend on the present relationship with their provider, how open and capable they are, how they cooperate with incoming changes, and how they’re performing at present.

4. Financial options

Transition costs, terminating fees, and other expenses will most likely eradicate savings costs of re-worked contracts. But IT leaders can do some re-negotiating based on such costs on newer outsourcing contracts, which can lead to huge savings in the long run.

There are roadblocks and other challenges in re-negotiating outsourcing contracts. But there are ways to address them without causing another set of problems. Anyone can overcome this if awareness and crafting the right strategy to succeed comes into play.