Survey Reveals Top Factors for Creating Value in Outsourcing Deals

Global, 25 July 2012 - Baker & McKenzie's latest annual survey of Sourcing and Shared Services has identified how procurement practices must quickly evolve as enterprises engage in increasingly complex business transformations to deliver value when easier wins in commodity services have already been made.

98 global organisations participated in the survey and shared their experiences as either customers or suppliers of outsourcing services. The top five most significant factors identified for retaining value were:

1. Consulting internal stakeholders during the RFP process to ensure comprehensive requirements that are aligned to business needs: this requires better internal governance of the RFP and contracting process
2. Well defined, measurable service levels that are aligned to the core business objectives, drive the right service provider behaviour and are flexible to allow for changing requirements
3. Engaging early and effectively with expert resources (e.g. procurement, legal, consultants)
4. Finding the optimal balance between transferring risk to the service provider and creating a relationship which incentivises innovation and delivery of real business benefit to the customer
5. Comprehensive service definitions aligned to the business which on the one hand allow flexibility for change and on the other avoid the challenge of surprise additional costs

Harry Small, Global Head of Baker & McKenzie's top tier IT & Communications practice, said, "It's worth remembering that these aren't just contracts: they are long-term relationships. Too often, the contract terms on which negotiators spend most time are a limitation of liability and indemnification.  But clients are looking to ensure that deals truly capture value and contracts reflect the commercial realities of the deal. Too much focus on traditional contractual terms can distract the negotiating parties from those terms which are much more likely to set the contract up for success and reduce value leakage, or, to put it another way, those terms which stop things going wrong in the first place."

The survey finds customers becoming more savvy and selective, as well as increasingly sensitive to compliance, and are more likely to ask how their service provider can help meet these challenges in a world with growing regulatory complexity, more enforcement and higher fines for those who get it wrong.

Over 85% of respondents agreed that early due diligence of compliance challenges, such as privacy, encryption controls, tax and sector specific restrictions (e.g. banking secrecy), result in a deal structure with less compliance risk for the business and lower ongoing compliance costs.

To obtain a full copy of the survey, please contact , Global ITC Business Development Manager, or order a copy here.