ShouldDo-list for new outsourcing contracts in 2009

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To those companies that want to benefit from the opportunities in the market the following recommendations regarding the structure of new contracts:
  • Limit the scope of the services/ products and the duration of the contract. Start for example with one service and/or country and progress from there.
  • Start with a structure base don hiring people / knowledge/skills and evolve into a more complex delivery model based later on. The future model can consist of a service/product catalogue describing the service/product in terms of deliverables, activities, quality parameters et cetera.
  • Split (analogue to the first point) the transition phase into multiple smaller phases (e.g. transition per country) and avoid a ‘big-bang’ project. Incorporate a performance based payment structure linking the successful delivery of a phase by the supplier to an invoice. This approach requires among others a definition of every phase in SMART deliverables.
  • Avoid complex transformation projects where existing process models (Present Mode of Operation, PMO; Current Mode of Operation, CMO) are reengineered to fit into the suppliers blueprint as these are very risky and often cost a lot of management attention from both sides. And management attention is something that is at short supply these days and should be available to go through the economic winter
  • Suppliers also feel the effects of the economic situation and may also become subject to a takeover or chapter 11. Pay thus adequate attention to sourcing strategy (e.g. multi sourcing), termination and exit clauses/fees/plans.

The measures described above are intended to improve on one hand flexibility while at the same time lowering the risk profile of the individual engagement (and the risk profile of your sourcing portfolio as a whole).

One additional remark what to do with existing contracts: analyse the portfolio with existing outsourcing contracts determine whether the initial starting-points are still valid. Define based on the outcome of the analysis the follow up activities. Think about adjusting the volumes (expand, reduce), price (lower) and exit/termination clauses. I shared earlier already my view on what to do with your shared services in this post.

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