Outsourcing deals inflexible

Poor planning means companies outsourcing key functions feel trapped by their suppliers, claims a KPMG survey.

KPMG’s management consultants warned more care should be taken when drawing up outsourcing contracts to avoid companies feeling tied to their contractors.

Ian Law, principal consultant at KPMG Management Consulting, issued the warning at the OMG Outsourcing Today conference last week.

Drawing on a recent KPMG survey to illustrate the problem, Law said even though 59% of respondents said outsourcing contracts were due for renewal in the next two years, 41% had no provision for any transfer of assets if they decided to place their contract with another supplier. Almost 40% of clients felt they were ‘locked in’ to their suppliers.

Law said businesses often use their suppliers’ contract draft – which was bound to favour the supplier. He said customers who sought advice from a third party, such as a lawyer or consultant, felt more comfortable with the performance of their projects.

But he predicted that with buyers becoming more sophisticated, they will want a better deal next time round.

Price Waterhouse has added a procurement service to its business process outsourcing practice, comprising Strategic Sourcing and World Class Processing Efficiency. The announcement follows MORI research which found 48% of organisations interviewed were considering outsourcing.