Mistakes to Avoid in Outsourcing Contracts

Outsourcing can become a big headache for a company and a source of serious losses if due attention is not paid to contractual details.

Wednesday, August 11, 2010

Steve Semerdjian, writing for nearshoreamericas.com, comments that, "while outsourcing has become commonplace in today’s business environment, the contracting process will, rightfully so, continue to challenge even the most senior outsourcing veterans".

He highlights six of the most common mistakes made:

1. Incomplete Business Case
A thorough solid business case should organize the details of the transaction clearly and include prices and costs retained by the company.

2. Deal Not Scalable
A contract, and especially the pricing mechanism, should be able to cope with changes to the scale of the outsourcing deal.

3. Exit Costs Unclear
It is vital for the company to understand the costs incurred in bringing the outsourced operation back in house.

4. Lack of Change Management
There should be a clear process for agreeing changes to services and corresponding costs.

5. Over-dependence on Benchmarking
In practice, benchmarking clauses can rarely be used to successfully negotiate better prices during contracts.

6. Service Provision Unspecific
These should be described in as much detail as possible.

More on this topic

New Sykes Operations Center in Costa Rica

January 2012

Located south of the capital, in the area of Hatillo, the transnational will open its third hub in the country on February 2nd.

The company, which currently employs over 3,300 people at its two contact centers, has not yet released details of the investment.

"This is believed to be the first contact center in the country operating south of the metropolitan area.

Business Process Services: In House or Contracted?

August 2011

Panama became the center of debate regarding outsourcing services.

While some companies choose to keep all operations in one place, others prefer to diversify across Latin America, where the growth of shared service centers is increasing.

The conference, which was held in Panama City, brought together representatives from companies such as KPMG, Carvajal Technology and Services and TACA Airlines among others.

Amway To Begin Operations in Costa Rica

February 2010

The marketing giant will open a financial operations center in April.

Craig V. Witcher, vice president of the U.S. company, confirmed the news, which was leaked by non-official sources on October 2009.

Witcher also detailed that their offices will be located in Forum 2, Lindora, Santa Ana, in the capital city of San José.

Teletech Call Center in Costa Rica Grows

April 2009

The multinational service outsourcing company has a payroll of 1,200 employees and it expects to hire 700 more people.

Future employment increases will depend on demand for the company’s services, and "the incentives that the state might grant (in tax matters)."

The multinational company provides customer service outsourcing to Spanish and American companies.

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