Points to Consider While Signing An Outsourcing Deal

Posted on April 15, 2010

Companies are increasingly seeking new ways to reduce costs, and everything from legal and HR services to healthcare and R&D are being outsourced. The decision to outsource business processes is a strategic business decision. In the current economic environment, companies are increasingly looking at opportunities to seal outsourcing deals with service providers that provide high-quality services at competitive rates.

While there are several benefits associated with outsourcing, it is interesting to know that outsourcing goals differ from company to company. It is important to follow some general guidelines to ensure that you get the best in your outsourcing endeavours.

Glance Through These Tips to Negotiate a Good Outsourcing Deal

  • Keep length and flexibility in mind: A good deal should consist of an initial term of 2-3 years with successive extension and withdrawal options that can be exercised at your discretion, keeping in mind mutual benefits.
  • Meaningful Service Level Agreement: An outsourcing deal should be confirmed with a meaningful SLA (Service Level Agreement) that ties into the vendor’s performance and other important clauses.
  • Payment options: A good deal should take into account the international implications of payment, including the frequency and mode of payment.
  • Key personnel clause should be prominent: Ensure that competent personnel are designated as “Key Personnel” to work on your project. This provides you the control on the quality of the labor working on your project.
  • Intellectual property rights: This is especially important when software is being developed. Ensure that the intellectual property rights remain yours and are not misused by the vendor.
  • Have a termination of contract clause: This will come in handy should work be completed earlier than planned. Negotiate and ensure that termination of contract is possible without a significant early termination fees.
  • Benchmark quality: This allows you to stay competitive in the market by adhering to industry standards. Make sure your vendor is a certified service provider and can conform to established standards.

Also important is to put in place a monitoring system both at your end and the vendor to ensure that you are constantly updated on each and every stage of development of your project. A good monitoring and reporting mechanism  helps in drawing a fine line between the success or failure of your project.

Now that you know what it takes to strike an outsourcing deal, you can go ahead and outsource your requirements to an offshore service provider.

1 thought on “Points to Consider While Signing An Outsourcing Deal

  1. Julienne

    Decisions are made in command and control fashion from the financials without knowledge of the work and/or based on scientific management theory that has long proven . . . outdated. This is an informative post that rounds up all the details. You make some good and valid points.


Leave a Reply

Your email address will not be published. Required fields are marked *

nine + seven =