Are there any general parameters or rules to assess the cost of contract or deal governance on the outsourcing buy side?
We consider three major categories as a guide: Location, Complexity, and Buy side profitability. Each case should be analysed in more detail, but we start with the following rebutaable propositions: Location: Offshore deals between 10% and 12% of TCV (“Total Contract Vaalue”); Local (or Onshore) deals between 3% and 6% of TCV. In addition, we note the rule established by TAU Group Inc. that: BUY-SIDE OUSOURCING CONTRACT GOVERNANCE IS INVERSE PROPORTIONAL TO SELL-SIDE DEAL PROFiTABILITY. In other words the slimer the Vendor profit margin (or even loss) the more expensive is to manage the vendor to deliver contracted services at the price and service levels prescribed.
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