Creating Improvement Incentives In Application Outsourcing Contracts

Both suppliers and their clients continue to struggle with how to price applications outsourcing (AO) relationships for the best alignment of interests and shared risk. But only a relative minority of clients are ready for the leap to managed outcome contracts. As a result, clients using other contract structures like staff augmentation or work volumes should attempt to balance supplier costs and concessions in their application outsourcing relationships by extending carrots along with the stick of rate renegotiation in the form of incentive clauses.