What to Look for in Next-Generation ITO Deals
Dave Brown, Principal, KPMG Advisory Services
When you established your IT outsourcing agreement, you probably did the deal and put it in a drawer, so it may have been a few years since you’ve thought about IT contracts. But now that your contract is coming up for renewal, how can you make the most of the next generation?
The IT outsourcing market has matured since you signed your original deal, and price is no longer the No. 1 driver. Indeed, there’s only so much you can squeeze your service provider on price before you start squeezing quality as well. Instead, next-generation deals are about improving service delivery, managing risk, staying current with the IT market, and positioning your business for an uncertain future.
As you prepare for renewal, consider these five factors:
- Partnership and innovation. Look for your service provider to step up as a true partner on innovation. That could mean making investments to solve problems or providing industry insights to help you excel against the competition.
- Cloud computing. Cloud solutions are not one-size-fits-all, so make sure your contract has the right solution for your company’s needs.
- Flexibility. As your business continually adapts to the marketplace, your ITO agreements should be adaptable as well – in terms of the commercial offering, contract terms, staffing and delivery location.
- Price. Price will always be important, but keep in mind that next-generation contracts usually don’t offer as much opportunity for price reductions as the first time around. Remember that a myopic focus on price can threaten the quality of operations.
- Cross-functional service delivery. Consider how IT services can drive new value by improving back-office functions throughout the enterprise.
To learn more about these considerations, please see our white paper IT Outsourcing: The Next Generation. For more from KPMG on this topic, visit the KPMG Shared Services and Outsourcing Institute.
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