Consider the Source

The Sourcing Chicken Game

Today's blog on negotiations for sourcing transactions comes from Peter Allen, Director & Managing Partner, TPI.

Businesses play the game of chicken for many sourcing transactions, and that is not good for either party.

A recent survey by the well respected International Association for Contract & Commercial Management (IACCM) indicates that negotiations are dominated by quarrels over short-term considerations. Battles revolve around short-term costs, risk allocation and self-protection, driven by the continued perception of adversarial roles between buyers and providers of outsourced services.

Recently, IACCM published an excellent and timely compendium of contractual terms commonly encountered as points of contention in trading relationships. It includes those specific to sourcing contracts and is a good starting point for examining unfulfilled expectations.

Server Consolidation within Outsourcing Contracts

Guest blogger Carol Wright of TPI’s Financial Analysis Services Group “blogging about the bottom line”

Service providers are increasingly touting “server consolidation” as a sure way to cut costs in IT sourcing contracts. Providers typically offer guaranteed price decreases based on a commitment to reduce the total number of client servers. However, guaranteed decrease in price shouldn’t drive hasty contract signing.

The two primary alternatives include: consolidation guarantees within a sourcing contract via contractual price reductions, and project by project consolidation efforts.

A New Generation of Outsourcing Governance

Today’s guest blog on the evolution of outsourcing governance comes from Claude Marais, Partner and Managing Director, Governance Services, TPI.

Outsourcing governance is increasingly coming under scrutiny.  Until recently, outsourced functions were overlooked during budget cuts or productivity initiatives as many assume they already gave their “pound of flesh.” This is no longer true given the pervasiveness of outsourcing in the average company today.

Companies are entering into the third generation of outsourcing governance. They realize the value of viewing it through the lens of business operations, creating the same level of scrutiny as any other part of their organization.

Foreign Currency Considerations Should Not Be Foreign

Ted Botzum of TPI’s Financial Analysis Services Group will be “blogging about the bottom line” this week.

With many long-term outsourcing contracts for services delivered from emerging economies, U.S. companies need to apply serious forethought when handling foreign currencies. Beside the depreciating U.S. dollar, there are many practical matters to be considered.

“Incent and Reward” versus “Lift and Drop”

Today’s guest blog on finance and accounting outsourcing (FAO) comes from Bill Frech, Partner & Managing Director, CFO Services North America, TPI.  

Standardization of processes and implementation of best practices requires a degree of maturity, but instead of explaining the nuances, some analysts have jumped on the bandwagon of blaming F&A outsourcing for missed expectations. Is their finger-pointing on target?

The waters are muddy, and we decided to clear up some common misconceptions by surveying a number of clients involved in TPI-advised deals that have been in place for over a year. Some were multifunctional, others were just finance and accounting deals, but they all have one thing in common: the deals are operating and proceeding well.

Should your Service Provider also be your Bank?

Each week TPI’s Financial Analysis Services Group will be “blogging about the bottom line.”  The group’s first guest blog comes from Tim Langley-Hawthorne, Director at TPI.

IT asset management is generally a pain. Most clients I’ve worked with struggle to do a good job at this basic task.  When considering IT outsourcing, the natural temptation for clients is to get out of the IT asset business, and have the service provider take over asset management and ownership responsibilities.

But the objective to clean house and transfer IT asset ownership to the service provider may be in conflict with the company desire to achieve ongoing financial savings from outsourcing.

Privacy Musings

Today’s guest blog on data privacy comes from Sarah Seabury, Director at TPI.

Musing time for sourcing advisors, and most executives these days, seems to be normally conducted at 30,000 ft. So no surprise that during my final descent to a country that I had never visited before, I found it interesting to consider how much data this new location already holds about me - despite the fact that I had yet to actually arrive.

Like most travellers I made arrangements in advance, so my credit card details, personal address, passport number, business contact details and probably much more arrived before I did. Possibly these details had already been transferred to another country or a third party organisation for processing without my knowledge. Multiply this by all the countries that I’ve visited and the many personal transactions involving my personal data during my lifetime and what do you get? –  a virtual server with my name on it, over which I have very little control, despite the fact that all the data fundamentally belongs to me.

A Rising Tide Lifts All Boats?

Today’s guest blog on European outsourcing comes from Duncan Aitchison, Partner and President, EMEA, TPI.

The outsourcing market has seen a near seismic shift over the last two years in the geographic profile of market demand. No one is standing still.

For the majority of the past three decades the United States has been the leading buyer of outsourced services. In fact, just five years ago it comprised 66 percent of the outsourcing contract value. By the end of 2007, this picture changed dramatically. The United States accounted for less than 30 percent of the global contract value while Europe led by 50 percent in the same period.

So how has this change impacted the service provider community and the European heritage providers in particular?