Don’t Let the Impending Expiration of BPO Contract Sneak Up on You

Principal David Borowski offers guidance in this contributed article regarding the importance of monitoring the outsourcing contract lifecycle to ensure that buyers are best leveraging contract options throughout a vendor relationship. Sample excerpts: “BPO customers often miss out on a key opportunity for significant outsourcing relationship enhancement, cost savings, and quality improvement – well before the contract expiration. By the time most companies begin to think about evaluating their expiring BPO contracts, it’s often too late to do anything about it. The default reaction is typically to renew or extend the existing agreement, which further commits the buyer to rates and terms that are likely no longer competitive with the market, locking it into an increasingly unfavorable deal for one or several more years…Depending on the services being performed by the outsourcer, it may require a year or longer to be in a position to responsibly transition away from an incumbent. To have sufficient time to pursue any available option – renewal, modification, or termination – a buyer needs to account for the amount of time it takes to (i) assess the existing relationship; (ii) engage the incumbent in structured extension / renewal discussions; and (iii) still have enough time for a legitimate threat of competition and migration, where the RFP process and subsequent disengagement activities themselves may take more than 12 months.”

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