SEO Marketing Research

SEO Marketing Research header image 2

Negotiating business process outsourcing (BPO) agreements

119 Comments · Business outsourcing

Because of the complex and evolving nature of the outsourcing process, negotiation of BPO agreements requires a different mindset than that required in traditional commercial contract negotiation.

Outsourcing is by definition a collaborative effort, rather than a zero-sum game. Zero-sum negotiating means that each party is motivated to extract as much value as possible from the limited available resources, even to the detriment of the other party.

By contrast, in positive-sum negotiating, the parties are interested in creating more resources and value than currently exists and then dividing up the gains.

The $64 word often associated with this type of negotiating is synergy. A BPO negotiation should be conceived as closer in nature to negotiations with a joint venture partner than to negotiations with a vendor.

From the BPO buyer’s perspective, the process of selecting an outsourcing provider and negotiating the outsourcing contract is the first opportunity to evaluate the corporate culture and mindset of the vendor.

Organizations that have decided to undertake a BPO initiative should use this opportunity to assess cultural fit with the BPO provider. There are many potential signals at this stage of the BPO relationship that could portend future problems.

For instance, if the vendor fails to recognize and take seriously this critical stage of the outsourcing relationship, that could be a red flag that the relationship may not develop as planned.

BPO buyers can use several strategies to determine the character of the firm they have selected as their vendor. For instance, different negotiating strategies may be employed to distinguish a cooperative vendor from an adversarial one.

At the outset of the selection process, clients may attach a proposed form of the master outsourcing contract (without detailed exhibits, such as scope of work, service level agreements, and pricing) to the RFP in order to evaluate which prospective vendors will accept the buyer’s general terms and conditions.

Vendors who are unwilling or reluctant to accept the buyer’s general terms and conditions without significant negotiation can be readily identified and disqualified.


119 Comments so far ↓

Leave a Comment