Restructuring outsourcing agreements

This has been a hot topic this week with many postings on the subject, including the one at Consider the Source. For me, the report Restructuring Outsourcing Agreements: An Indication of Failure, or a Tool to Increase Value offers some interesting insights into this topic. While it is widely believed that companies restructure their outsourcing agreements to "save more money", the survey results showed that the reasons most often cited were:

• The contract was revised after having expired
• A change in business volume
• A change in service scope
• Issues with service pricing

with the first two items being the most commonly cited reasons. What was even more interesting though is the analysis of trouble spots which shows how companies, by their own admission, often contribute to the conditions that eventually force them to revise an outsourcing contract. Note, in particular, the emphasis on setting up contracts versus actively managing them.

Survey results - Click for larger image

This is consistent with the theme that outsourcing done well requires an ongoing, sustained focus that considers when outsourcing makes sense, executing sourcing transactions well and then properly managing the arrangements that you have put in place.