Welcome back to another installment of Whitepaper Wednesday here on the Purchasing Certification Blog. Today, I’ll be reviewing a whitepaper entitled “Be Prepared: Five Steps to Optimizing an End-of-Contract Negotiation Strategy” from Compass and CFO.com.
The first paragraphs of this whitepaper set the stage for why it is important to have an end-of-contract strategy when preparing to either extend or replace a relationship with an outsourcing service provider. Specifically, it says that sourcing teams are commonly “under-prepared and overly confident” in thinking that negotiation will be easy because “conventional wisdom states that…[incumbent] service providers…are eager to retain customers.” In reality, the whitepaper contends that service providers know that switching providers is “is a costly, risky, and time-consuming proposition…and use this knowledge to their advantage in the negotiation process.”
The whitepaper offers “five key steps” for a sourcing team to maximize its leverage as contract expiration approaches. While I found all five of these key steps to be valuable, I thought that the following two were the most important and would probably resonate most with readers of this blog:
3. Get Senior Level Support – This point discusses the very real possibility of the incumbent service provider obtaining a contract renewal – at less favorable terms to the client organization – by backdoor selling to the executive level if the sourcing team lacks senior level support.
4. Be Serious – This point essentially states that incumbents seek evidence that the client is willing to pursue an alternative. Without such evidence in the form of things like an information-packed Request For Proposal and active lobbying of potential bidders, the incumbent may be inclined to call the sourcing team’s bluff.
Sometimes, Whitepaper Wednesdays can be a bit onerous for me. Not this time.
I found the topic of this whitepaper to be very thought-provoking and its solutions very practical. If you’d like to check it out for yourself, you can download your own copy from CFO.com (registration required).
To Your Career,
Charles Dominick, SPSM
President & Chief Procurement Officer
Next Level Purchasing, Inc.
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