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Insourcing

Whilst the outsourcing market continues to grow, and the majority of ongoing contracts are rebid, there is always the possibility the customer may decide to take some or all of the work delivered on your contract back in house. Usually this will happen at the end of the contract period after a review of options, but sometimes the customer cuts the contract short.

As the incumbent, either option is bad news. Even if you are compensated for a terminated contract you lose the ongoing revenue for the contract and there may be reputation issues with other customers and stakeholders asking why the customer felt your delivery wasn’t delivering enough benefits to keep the contract outsourced. Some solicitations specifically ask whether your company has had a contract terminated recently and you have to go through an explanation of why, or even potentially lose marks in the evaluation.

We’ve reviewed four papers based on research projects covering Insourcing, published over the past 10 years, to pull out how common Insourcing is; why customers insource; and what benefits they feel they gain from it. This paper summarises those issues and then goes through what you can do as the incumbent to reduce the risk of your customer insourcing your contract.

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