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How to reevaluate outsourcing contracts best practices

Bill Martorelli | Nov. 14, 2011
Contract terms for outsourcing continue to change with the times, at least at the margins.

Some additional terms have regained new urgency given the changing nature of outsourcing engagements themselves. Consider the following:

Transition assistance remains of critical importance

With industry consolidation on the rise, sourcing teams should become more aggressive in securing transition assistance in a contract with adequate discussion of timeframes and payment provisions. Keep in mind that the requirement should apply whether the client transitions the work back in-house or to another provider. A clearly specified division of responsibilities is another important aspect of planning for transition requirements.

Key personnel provisions are not just for managerial roles any more

Savvy sourcing managers know that access to the supplier's "A team" contributes to success. Adding key personnel provisions to retain access to administrative and managerial talent from key suppliers is a time-honored approach to reinforce continuity of service. Forrester clients are finding, however, that such provisions are also useful for key technical roles in cases where the skills are critical to success and where the customer wishes to avoid a lengthy ramp-up period.

Align termination fees with length and type of contract

As outsourcing contracts get shorter and less asset-intensive, the nature and purpose of termination provisions evolves. In this environment, onerous termination provisions may not always reflect a supplier's legitimate need to recoup investment on behalf of the customer but represent a mere penalty and should be minimized or avoided altogether. Generally speaking, suppliers will seek to recover costs incurred in both winning and servicing their contracts, so sourcing executives going into the contract phase should be mindful of supplier selling and delivery costs.


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