How To Negotiate Outsourcing Contracts With Service Providers?

Negotiations play an integral part in defining the price mechanism in offshore outsourcing deals

. And it depends on the clients to negotiate effectively so that they get a good deal. The best time for outsourcing customers to negotiate with their vendors, be it regarding the pricing or service quality, is during the final months of the outsourcing contract. This is because the customer can consider alternatives without any risk of penalties while service providers do their bit to get clients to renew the contracts with them again.

Here are some tips that will help you negotiate effectively with your service provider as your contracts approaches expiry so that you can get a better deal for the next term.

Keep Existing Operations as the Baseline for Comparison

Start this process about two years before the expiry date of the contract and start collating data about the markets and popular trends and business practices. This would give you a baseline on which you can compare the existing operations and thus negotiate a decent price.

Draft a powerful Sourcing Strategy

With the baseline data that you have accumulates, define the current and future trends and evaluate the several options that are available to you. You can wither renew the contract or probably divide them into parts. Analyze the pros and cons of all the options and consider factors like risk, prices and management change issues. This should be done at least an year before the contact's expiry date so that you have enough time to negotiate the renewal or post RFPs.

Specify your Requirements Clearly

Wanting reduced cost and enhanced quality of services is quite obvious for any business. But they are broad terminologies. When you sit down to negotiate the contract renewal process with your service provider, make sure you inform them about specific targets for improvements. If you want reductions in storage costs, inform them the exact figure. Similarly be very clear about other specifications as well.

Be Ready with Alternatives

Negotiations might not be as smooth as you expect them to be. So, if your vendor doesn't agree for the improvements and deals that you suggest, make sure you have the alternatives ready. Remember, you cannot get through if you remain staunch on your stand. Negotiations are all about comprising on each end in order to get the best middle ground.

Take Support from the Senior Level

Before suggesting anything, make sure the senior level people in your company i.e. the top executives and board members agree with your plans. This would avoid any potential problems or issue in the future where there can be difference of opinion in the company. Also, this would keep everyone on the same page about the status of the deal.

Resolve the Issues

Negotiations at the end term of the contract allow customers to resolve any problems and issues that they might have been facing during the course of the project. The service provider would be more ready to address and resolve the issues so that you are more willing to renew the contract with them.

by: Maneet Puri

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