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Common Challenges when Renegotiating IT Contracts

by: Sarah Joson

Thursday, July 30, 2015 |

IT Outsourcing Contract Renegotiation

A post at CIO.com listed down the factors that can be detrimental to contracts that are undergoing renegotiations midstream. Potential risks can come from the client’s side or are already seen in the contracts.

Management should be aligned with the contract.
As the saying goes, “the only thing that is constant is change.” It will disrupt operations particularly on the client side and if a small part of the contract is amended, both parties should ensure that changes within the operation or among employees are communicated and enacted.   

Do you have enough resources?
The client has to check if their current resources, such as manpower, will be able to operate non-stop once contracts are renegotiated. If not, they would have to team up with third party service providers to accommodate the changes.

Who has the upper hand?
During renegotiations, it is important to consider that you are in a partnership. The other party is working with you - even for you, and will cooperate with you as long as you are being reasonable with your new terms.

Expenses and costs can also change.
Some contracts rely heavily on the budget, which is why a slight change within the industry can affect the contract renegotiations midway. For instance, if the contract doesn’t cover inflation costs or termination fees, it will be difficult for both parties to iron such issues out when it’s time to renegotiate and reconsider the current contract.
Whether you are signing a long-term or short-term contract, create contingency plans and consider these factors before closing the deal.

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