Three Tips for Renegotiating Outsourcing Contracts

Ann All

Last month, in a post about a new spending report from Forrester Research, I noted that 70 percent of companies surveyed by Forrester intended to wring further value from their relationships with services providers by renegotiating their contracts.

A recent piece offers three great tips on doing so from David Patzwald, CIO of Schneider Electric North America:

  • Include executives other than the CIO. If you can get the CFO or even the CEO to the table, Patzwald suggests, vendors will approach negotiations differently and in a way that benefits your company.
  • Create metrics for both financial and broader "relationship" satisfaction and balance them to ensure that one doesn't suffer at the expense of the other.
  • Seek vendor input when making key decisions such as whether to extend legacy applications or if a project should be ended.

I like Patzwald's advice because it suggests that there should be more to outsourcing initiatives than trying to get the lowest cost possible, a point I make frequently in this blog and one that's no less true despite the currently harsh economic environment.


Patzwald's third suggestion was echoed in an interview I did last year with Ben Trowbridge, CEO Americas for Alsbridge. Trowbridge said providers may be able to suggest changes that can save them, and you, money. The interview is well worth a read for further ideas on contract renegotiation. Another tip from Trowbridge: Maintain an overall sourcing strategy with timing, including a date that will be a "go" or "no-go" with your current provider. He said:

You're not doing that to be overly aggressive with them. Often the incumbent provider is making money with the current contract, it's not in their interest to change at this point, so you have to give them a little nudge. Having a strategy and sticking to it helps.

Add Comment      Leave a comment on this blog post
Oct 21, 2008 1:56 AM tinasilvee tinasilvee  says:
By Outsourcing services such as website designing, flash, CMS development, internet Advertising, multimedia, graphic design, web site maintenance, SEO, to professional and experienced IT outsourcing organizations can help any website to get a better visibility vertically as well as horizontally. Reply
Jun 10, 2009 4:31 AM Valentin Secades Valentin Secades  says:

This is interesting, as the recession deepens overall.  The strategy for some companies has been to improve their BI outlook on a business rather than squeeze more money out of a given outsourcing company (which overall tends to push these companies into providing stripped down versions of what other companies ask for, or inferior service).  This is something that really needs to be looked over by contracting companies, and evaluate what it is they are really looking for in general terms - save a few bucks (that can be resolved with a straight conversation with the contract service provider), or generate a feature set more rich than the current one that exists at the moment by correct communication with their contract service providers?  Just some questions that would be good to answer before going this route.

Sep 6, 2011 2:12 AM Joomla outsourcing Joomla outsourcing  says:

We are into this outsourcing business for the past 7 years with approved 1350 plus LIVE sites from our development centre for our clients all over the world.We have 125 developers who have constantly worked and having 7 years experience in the field of Joomla,drupal,wordpress and Magento.


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