Buyer attitude creates tension in outsourcing renewal

Lawyers believe involving procurement professionals makes renegotiating outsourcing contracts with suppliers more antagonistic - but this doesn't necessarily mean you end up with a bad deal.

By Lindsay Clark ifpsm - עדכון אחרון: 15/02/2011 22:36:05

The study, from outsourcing research firm EquaTerra, considered responses from 70 senior lawyers in North America and Europe. It found that the single greatest factor in making second-generation outsourcing deals more contentious was the involvement of procurement, rating more three on a scale of one to five.

"As outsourcing efforts become more complex and pervasive, collaboration between the buyer and service provider becomes ever more important and, in general, heightened levels of contention do not contribute to the positive level of client-and-provider collaboration," the report said.

However, the report emphasised that becoming more contentious in negotiations could mean improved value for money. "The degree of contentiousness is not necessarily good or bad, and its merit is derived from the ultimate value it brings the buyer organisation," the report said.

"There was strong consensus that the involvement of the client's procurement organisations leads to more contention, but as one respondent notes, this is positive if it leads to better value for the client."

The research found that growth in outsourcing is being driven by US buyers, where 63 per cent expected an increase in demand during the first three months of 2011. In Europe, only 48 per cent saw demand increasing over the same period, while 46 per cent said it would stay the same and 6 per cent said it would fall.

The survey also found renegotiating pricing was the primary reason for a buyer to reopen a contract with a provider. This was rated at an average of nearly four out of five, compared with a score of three for overhauling governance.

Meanwhile another survey of lawyers advising on outsourcing contracts, by law firm Morrison & Foerster, has suggested that environmental considerations will become more firmly embedded in negotiations with outsourcing providers this year. "Clients are starting to discuss meaningful service levels around 'green' issues," the report said. "This is an early-stage trend that will increase in 2011, driven by financial reporting requirements, increasing energy costs and, in some countries, statutory requirements."