Easing Outsourcing With Contract Management

The trend of contract management has been more prevalent in US and Europe than in Asia. However now, with an increase in outsourcing even India is getting accustomed to this relatively new phenomenon. Sunil Mehta, country manager, Quint India – a global management consulting firm specialising in IT, shares with Biztech2.0 interesting information about this growing trend, which will only see more following in the months to come.

With economic slowdown, how do you foresee outsourcing and what role is contract management bound to play?

Outsourcing agreements generally are arrived at according to a phased plan extending from the formulation of the outsourcing objectives to contract finalisation. Once the contract has been signed, transition to the outsourcing provider takes place and contract management begins. The outsourcing party now focuses on guaranteeing that high-quality services are rendered at an acceptable cost.

In the current economic scenario, organisations tend to develop discontentment with their outsourcing partners due to several reasons as business pressures increase, budget cuts happen, and targets become more difficult. During a recessionary phase, organisations look at ways to reduce cost without impacting the delivery of services. It becomes important to retain existing customers and achieving more with the same resources brings challenges on the optimisation front. The need of the hour is to improve efficiency, improve quality of services and optimise their operations while reducing the cost of providing services.

This is where the seven pillars of contract management come into play to enable organisations to consolidate their demands and suppliers to regulate their offerings in the best possible manner in today’s scenario. An organisation must be equipped for the task of managing its relationships with external suppliers as effectively as possible. Companies on the demand side are an important factor in the success of outsourcing relationships.

Contract management principles play an intermediary between the supplier and the client side. With recession setting in and affecting different segments of business, this becomes a dependable tool to regulate deliverables and profits.

Over the last ten years, large enterprises have automated their business processes and increased their efficiencies by deploying information technology, what has been your own experience in this regard?

Organisations have built efficiency by automating their business processes to improve turn around time. Organisations have used IT extensively to improve productivity and efficiency of critical business processes. Availability of timely information is very critical for any business, be it in any sector. Business Demands have grown, the customer base has grown and companies have also grown tremendously. As organisations acquire, merge or integrate, business needs will grow and to cope with this information flow, organisations will need to invest in appropriate and scalable IT solutions. It also helps businesses to be more customer centric and helps them to stay ahead of the competition. Organisations have been able to improve customer satisfaction through effective reporting and monitoring of their IT services by virtue of automating their IT management processes.

While organisations are very severely looking at cutting costs, why will they invest in contract management?

It is clear that IT services are increasingly becoming a ‘commodity’. Rather than a means by which competitive advantages can be obtained, IT is becoming a means of production.

Such IT services are increasingly outsourced to external suppliers. Given, however, that these services pose a risk for the organisation, it is of even greater importance that the services and inherent risks are well-managed. A number of organisations are struggling with the issue of managing outsourced services.

In such a scenario, contract management provides a perspective of the market dynamics, shares benefits of economies of scale and provides a balanced approach between transaction costs and production costs. Moreover, contract management provides a means to both the vendor and the organisation to plan their budgets in advance so that an economic crisis such as the current one still brings them optimum benefits.

How do you see Indian organisations responding to the whole concept of Contract Management?

We have received a great response from the Indian market and we have already signed in customers for this programme. This programme is beneficial to all verticals especially BFSI. We have also conducted training and workshops for CXOs in India and plan to co-ordinate many more in the days to come. We are receiving an immense response from the market as companies are gradually realising the benefits of this model while operating under acute circumstances.