Bay Area Digital Executive Dinner Series 

Register for the event by completing the form below.

Farallon | 450 Post Street | San Francisco, CA 94102
Wednesday, May 1 at 6pm PT

ISG Partner, Prashant Kelker will present
Implementing & Tracking a Digital Operating Model

TOPIC:  Implementing & Managing New Digital Operating Models

WHY ATTEND:  This session will focus on understanding what others are doing to establish and govern digital operating models in the new world.  We will be speaking to the challenges they face, and how some companies have overcome these challenges – the key topics we will address are:

• How should the organization structure adapt/change to address new digital models, and how have the leading companies executed change management?

• How will the design and execution of technology transformation programs inform and build its required target business capabilities iteratively using an evolving provider ecosystem?

• How do you ensure a solid digital backbone and operating model is established and maintained to scale and ensure quality in your transformation programs?

• How do you harness emerging technologies and bring them to mass scale usage within your enterprise (automation, analytics, ML, cloud, blockchain, etc.)

AGENDA:

  • 6pm PT Networking/Happy Hour:  45 minutes
  • 7pm PT Dinner:
  • Appetizer:  Implementing & Tracking a Digital Operating Mode
    Presented by Prashant Kelker, ISG Partner - Digital Strategy & Solutions
  • Dinner:  Open Q&A
  • Dessert:  Future Topics & Networking

This is a great opportunity to network and learn from peers. Feel free to bring a colleague!

Upcoming dinners:

Date TBD - Palo Alto: Blockchain Reality & Impact

Date TBD - San Francisco: The Automation Journey Conundrum

Haven’t we been here before? Contract expiration, renegotiation reach record levels

In eight of the past 10 years there has been a new record set for the most outsourcing contracts awarded globally. The 1,000 annual contract barrier was broken in 2011, when 1,163 outsourcing contracts worth at least $5 million annually were awarded, and there were 1,006 more signed last year. With so much activity in the market, contract expirations and renegotiations are also hitting record levels.

A record 901 outsourcing contracts expired in 2012, as we reported in the recently published 2012 Momentum® Market Trends & Insights Annual Report. The collective value of those contracts was $25 billion. Another $15.7 billion in IT outsourcing (ITO) agreements and $5.5 billion of business process outsourcing (BPO) are due to expire this year. That is a sizeable market that service providers cannot afford to ignore.

Existing customers represent a lucrative and familiar market, but they are not without challenges. Incumbent service providers are finding it increasingly difficult to convince clients to maintain or increase their spending levels when contracts expire. Clients are reducing the scope of engagements because they are eager to split work and award it to best-of-breed service providers, which is a major reason contract award volumes have been rising while overall outsourcing spending has been flat.

Many agreements are renegotiated prior to expiration to ensure no interruption in service. We see clients seeking to renegotiate contracts earlier than before, often motivated by the possibility of accessing new technology, improving innovation or simply wringing more cost savings out of their outsourcing engagements. Poor service provider performance was the driver behind 33 percent of contract renegotiations in 2012, down from 45 percent the year before but still tied with economic events experienced by the client as the leading reason for renegotiation.

We expect 2013 to be another very active year for contract renegotiations. Eight different vertical industries have at least $1 billion worth of contracts expiring, and 18 of the 27 verticals we track have more contract value expiring this year than last (see chart). There are also 17 individual contracts that were originally worth at least $1 billion over their lifetime that are due to expire in 2013. There are 594 ITO contracts due to expire in 2013, led by the Application Development & Maintenance (ADM) service line with 215. The 292 expiring BPO contracts include 56 for Customer Contact Services, 45 for HR Outsourcing (HRO) and 44 for Finance & Accounting (F&A).

Based on these numbers, we can guarantee that outsourcing clients and service providers will be coming back to the negotiating table frequently in 2013. With contract durations become shorter and renegotiations occurring earlier and more frequently they may feel as if they never left.
The full 2012 Momentum® Market Trends & Insights Annual Report has complete data about expiring contract volume and value by service line, region, industry and service provider type, plus successful negotiating strategies for the renegotiation era. For information about this report, or to learn about the ISG Contract KnowledgeBase, an online database with details about expiring contracts and account-specific outsourcing activity, contact me at paul.reynolds@isg-one.com.

About the author

Paul Reynolds leads Momentum, a division of ISG that provides research services to help service providers better target, win and retain business. Paul has 25 years of market research experience with specific expertise in methodology development, data analytics and research process design. Having found many service providers’ Advisor Relations functions to lack appropriate analytics, Paul is working to develop innovative new approaches that allow for data-driven programs based on the unique needs of each client. His approach benefits Advisor Relations, go-to-market functions, sales, strategy, marketing, and market/competitive intelligence teams.