Buyers keen to renegotiate complex outsourcing contracts

5 April 2012

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5 April 2012 | Paul Snell

Complex outsourcing contracts are fuelling demand for lawyers as buyers try to make changes to long-term deals.

According to the latest Legal Pulse Survey published by professional services firm KPMG, 45 per cent of the world’s top 30 firms have seen increased demand for outsourcing-related legal services, with just 7 per cent pointing out a decline compared with a year ago.

In addition to increasing the number of services outsourced, firms are also looking to reopen contracts to renegotiate pricing, scope and service levels as businesses try to find “wriggle room” with suppliers in deals.

The report also found the involvement of procurement in the sourcing process makes the negotiation process more contentious.

“It is important for businesses to recognise that there are differences in the way contracts are negotiated, depending on the maturity and nature of services being purchased coupled with the maturity of the service provider,” said Bill Thomas, partner in the shared services and outsourcing team at KPMG in a statement. “A one-size fits all approach is wholly inadequate and businesses need to take note that thoughtful, appropriate contracts are a foundation stone for a successful outcome.”

In reaction to suggestions contracting processes are taking longer, 41 per cent of those polled said this was due to deals becoming more complex. In addition, just over a quarter of those surveyed - 27 per cent - said there was “little, to no, standardisation” of contracts across the industry.

The terms most under dispute in contracts were around limitations of liability and indemnity and termination fees, but terms around force majeure and supplier location were least controversial.

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