As a sign of outsourced IT and BPO services maturity, Everest Group has observed contract benchmarking clauses being diligently invoked at regular intervals. Over the years, a corresponding proliferation in benchmark providers has also been observed that promise to help evaluate and optimize contracts. However, the focus of most benchmarking / contract review exercises tends to be on the directly “visible” levers such as resource unit rate cards and delivery mix alignment. There are a number of levers that remain hidden and are often ignored, resulting in untapped optimization potential. This viewpoint outlines some of the common obscure “choke points” that buyers need to be aware of, in order to avoid significant value leakage in contracts.

CONTENTS

This report provides an overview of the typical optimization levers that remain “hidden” in contracts, resulting in significant untapped optimization potential. The key sections of this viewpoint include:

• Factors causing value leakage in outsourcing contracts
• Typical sources of these choke points
  • Proposal vs. solution approach
  • Lack of contract “right sizing”
  • Misaligned productivity charter
  • Inequitable contract T&Cs
• Conclusion

Key questions addressed by this research are:

• What are the typical factors that remain hidden in IT and BPO contracts, resulting in value leakage?
• What are the typical sources of these choke points?
• How can buyers avoid the negative impact of these choke points?