IT Sourcing Renewals: Alternatives and Opportunities
Expiring contracts offer both new opportunities and the chance to renegotiate with the existing service provider at a significantly lower cost than the traditional RfP process that you probably used on the first generation outsource. While best practice will suggest that you need a competitive landscape, renegotiating with your incumbent provider on a sole source basis IS a viable alternative to the resource-intensive, completely new tendering process.
In principle, there are three options for action. The result of all three variants should always be a modern, future-oriented contract and prices in line with the market.
It is not uncommon for the players involved to be caught by surprise by the impending end of an ongoing outsourcing contract. Too often buyers leave it too late in the contract before considering their options. It feels like you’ve been with the current service provider “forever”, the exact contract details have long been forgotten, disappeared in the drawer and, in the worst case, there is no automatic reminder to the sourcing and governance specialists in good time.
In some cases, it will be the service provider who will remind you that the contractual basis will soon be coming to an end. If they mention in the same breath that it would be absolutely no problem to extend the contract period on the basis of the current conditions, then at least the purchasing department should pay attention. In some, but not all, cases such offers suggest that the terms may favor the provider. IF this is the case, a good buyer would certainly be able to negotiate better terms for the company.
The following is a look at possible options for action, how things can proceed without dealing too disruptively with the services concerned. Aristotle has a beacon from the lighthouse ready for the people involved: „We cannot change the wind, but we can set the sails differently.”