Renegotiations rise in popularity

3 August 2005
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04 August 2005 | Rebecca Ellinor

Companies are increasingly renegotiating outsourcing contracts, according to sourcing consultancy TPI.

Its latest index found that, by value, 20 per cent of contracts signed in the first six months of 2005 were for restructured deals.

This is almost double the average for the past decade, where they accounted for 11 per cent of contracts by value.

According to the index, of the 112 outsourcing contracts worth more than ?40 million signed across the world so far this year, 25 - with a total value of ?4.6 billion - have been restructurings.

They include renewed contracts, agreements where a service has been added or expanded, new assets have been acquired, or renegotiations have taken place.

Duncan Aitchison, managing director international for TPI, said one reason for the rise was that purchasers have greater power. This, he said, is because they have more suppliers and countries to source from.

He said from a buyer's view, this trend underlined the importance of establishing flexible agreements with robust exit strategies.

A TPI spokeswoman added that the figures showed it was "totally untrue" services that have been outsourced, such as accounting, payroll and HR, were increasingly returning in-house.

SMaug2005

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