4. Compel the vendor to cut costs in the future.
Include a contractual provision that obligates your outsourcing provider to reduce costs and charges in the future. The language should require the service provider to work with the client and/or other third parties to achieve reductions in the cost of service delivery, says Masur. You can oblige the vendor to prepare a proposal, at your request sometime in the future, identifying all viable means of achieving the desired reductions without adversely impacting business objectives or requirements.
5. Entertain new delivery methods.
Software as a service, virtualization, cloud computing, infrastructure on demand -- there are a host of new multitenancy, pay-per-use models available to IT services buyers today that will lower your IT costs.
"Clearly these come with compromises but [our] research has shown that many clients report satisfaction with some of these models," says Frances Karamouzis, research vice president for Gartner Research and Advisory Services.
It sure beats paying for shelfware.
6. Keep it simple(r).
Diligence in outsourcing negotiations is important, but don't over-engineer the contract.
"Clients often ask for an extensive amount of service levels which they don't need and will not likely monitor or measure," says Karamouzis. In the end, he adds, the client pays for all of those SLAs.
What's more, you may not need solid gold service levels to support your business today. "Buyers of outsourced services continue to pay for service levels that are far superior to those required by their business customers," says Trowbridge. "But, if your objective is to save costs, then it is best to align your service levels with the needs of the business and not pay for something you don't, strictly speaking, need."
In other words, relax select service levels on non-mission critical operations in return for better pricing.
If you think you need to negotiate rates for every job title that might work on your account, think again. "In application outsourcing, typically five job roles deliver over 90 percent of the work, thus there is no need to negotiate thirty," says Karamouzis.
But do follow a structured negotiation framework to ensure you don't leave any loose ends in the process, advises neoIT's Vashistha.
7. Don't automatically ink a deal with your incumbent provider.
It may be tempting-and seemingly cost effective-to keep dancing with the same partner who brought you to the ball. But signing a new deal with an old provider, while convenient, could be costly in the longer term. Instead look for the best provider for any new functions you want to outsource. Your existing partner may not be the best-or most cost effective-choice.
8. Fight for your rights.
Few IT service providers are eager to include customer-friendly clauses like the right to audit their bills or benchmark their prices in their new outsourcing contracts. But including these provisions will give you recourse in the future, should you suspect overcharges or prices out of sync with the market. Even if you never actually conduct an audit or bring in a third-party benchmarker, retaining these rights gives you pivotal leverage in the partnership.
Also, invest in outsourcing governance software to ensure you can continually evaluate provider performance going forward, advises Stan Lepeak, managing director of research for outsourcing consultancy EquaTerra.
Finally, adds EquaTerra's Stark, understand any termination obligations or costs you've agreed to so you're not held hostage by the provider at the end of the deal.
9. Consider a managed services model.
You should devote some time to determine the appropriate engagement model for your next outsourcing deal. More and more outsourcing clients are moving to managed services deals, according to neoIT managing director Sandeep Karoor. In the managed services model, the customer pays for IT services themselves at pre-agreed rates, rather than paying for man-hours of labor.
"The clients focus on outcomes rather than who does [the work] and where," says Karoor. That can free up the vendor to provide IT services at more competitive rates.
[ For more outsourcing contract negotiation tips, see 9 Ways to Save Money on Your Current Outsourcing Contract, How to Renegotiate an Outsourcing Contract and Negotiating Outsourcing Contracts: Beware Minimum Commitments. ]