In recent times, there has been increased activity in re-structuring of sourcing deals. This is not because of dissatisfaction with service providers but more due to changes in the business environment.

According to a recent study by TPI, which surveyed 40 companies that have either re-structured or renegotiated, the reasons most frequently cited include a change in business volume; change in service scope; and issues with pricing and contract revision after expiry. It concluded that renegotiation reflected a desire to get more value from the contract with 39% respondents saying it increased the contract’s value by offering additional services while lowering overall costs.

Only 72% companies receive the value they anticipated emphasizing the importance of aligning expectations when designing the contract.

Re-structuring contracts is not only a complex process but also consumes a lot of time. Only 13% of those surveyed were able to complete renegotiation within three months and 55% took about six months for the entire process.