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By Nick Heath
INQUIRER.net
Published: 11 March 2008 15:14 GMT
Outsourcing prices have slumped in response to aggressive cost
bargaining.
Buyers have forced discounts of up to 23 per cent on outsourcing deals
during the first two months of this year, a study by Compass Management
Consultancy (CMC) has found.
The 12-month analysis of 120 deals worth more than £30m each showed UK
companies opened negotiations with demands of between 15 per cent to 23
per cent cuts across the board as long-term deals were renegotiated.
Compass claims that many clients are renewing deals in order to get
short term discounts from vendors without due diligence and with no
understanding of the competitiveness of their current contract.
In a statement Geraldine Fox, director of sourcing services at Compass,
said: "We are seeing aggressive, high-level targets plucked from the air
in contract negotiations which bear little relation to what the business
needs. Asking for a 20 per cent cut across the board could be too much –
and drive a contract to failure."
Fox said that some managers were overlooking the fact that outsourcing
providers were delivering core services and treating them as
discretionary spend that can be cut at will.
Compass warns that even though outsourcing providers might offer
discounts of 18 per cent below the in-house operation on day one of a
deal they will often recoup the discount over the term of the contract.
http://www.sourcingmag.com/offsite.asp A=Fr&Url=http://services.silicon.com/itoutsourcing/0,3800004871,39170331,00.htm
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