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 “underprepared 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).

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Recommended Reading

• Contract Review Checklist
• Contract Termination Letter
• Eliminating the Pain Out of Contract Management
• Is Contract Management a Critical Process?

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