The New Approach to BPO and ITO Agreements

Nov 20th 2012 | Posted by WGroup

Today, BPO and ITO Agreements Leverage the Experience of Both to Support an Evolving Business Environment.

In the early days of BPO the structure of deals was modeled after the ITO deals of the day.  The primary goals of the original BPO deals were to make sure the client got every bit of margin possible out of the provider and to structure the deal so that it was absolutely clear what services were to be provided at what cost based on the client’s current environment. Any fluctuations in demand, up or down were forced into the ITO adopted ARC/RRC approach whether it worked on not.

This strict approach to structuring contracts for both ITO and BPO was a detriment to both the provider and the client.  The challenge was as the businesses evolved, needs changed and as technology became more accessible the strictly structured contracts were not able to address this evolution.  Through WGroup’s experience in working with numerous CFO’s and Contract Managers, we have found that their one complaint was that their contracts made it too difficult to address business changes. This resulted in frustration on both the client and provider side of the agreement.

The good news is, next generation agreements are being re-structured or newly structured to deal with the realities of business and the fact that a successful business changes and evolves.

As we see IT moving into the business due to the demands for better business knowledge, the consumerization of IT, and the use of outsourcing as a tool to optimize overall business performance, we understand the need to leverage the lessons learned from both ITO and BPO deals. Therefore, WGroup works with you to structure contracts with this evolving environment in mind…not the old rigid contract that had to be renegotiated whenever changes occurred.



Further reading: WGroup recently published a new strategy brief titled "Next-Generation IT Sourcing Primer.” Click here to download a complimentary copy.
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