Runaway Complexity of BPO Contracts Due Partly to 'Unrealistic' Demands of Clients

In this article, Principal Marc Tanowitz offers expert analysis on the growing complexity of a BPO contract. Sample excerpts: “‘BPO contracts were originally fairly simple, some were even written on vendors’ contract paper,’ says Tanowitz…However, Tanowitz said that eventually BPO buyers became more savvy and started demanding service level agreements (SLAs), price benchmarks, and other considerations which better protected them in the event of changes in project scope, currency value or vendor performance, but also greatly added to contract complexity…Tanowitz offers what at first sounds like a counterintuitive strategy of making contracts more complex upfront to provide more flexibility later in the life of the contract. ‘Do it right, do it once,’ he says. ‘Deals change. Service levels may need to increase or be relaxed. Put in the mechanisms upfront to enable changes (without having to renegotiate the entire contract).’”

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