Whitbread has signed a new IT-enabled business process outsourcing (BPO) deal with Steria, which extends the existing agreement by five years with an extra 14% annual cost reduction.
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Under the multimillion-pound contract, Steria will continue to provide finance and accounting business process services to Whitbread’s hotels and restaurants, including Premier Inn, Brewers Fayre and Beefeater. The companies have had a relationship for 20 years.
A 14% reduction in annual service cost has been agreed. Part of the services are provided offshore from Indian cities Chennai and Noida.
Cost reductions was vital in the new agreement.
“Our relationship with Steria has evolved into a true partnership over the past 20 years, and we are extremely pleased with the quality of the existing finance and accounting BPO we have in place and the cost savings and innovations we are set to see in the next five years,” said Andrew Pellington, finance director at Whitbread.
"In the current economic climate, we need to ensure efficiencies are made across the business, and with Steria we know that this is the case," he added.
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Negotiating lower prices
Businesses are in a strong position to get prices dropped when contracts are up for renewal, and in the current climate they have an even stronger hand.
Robert Morgan, director at sourcing consultancy Burnt-Oak Partners, said businesses are always trying to get suppliers to lower their prices, but they have more of a case today.
He said it is not unusual for discounts of 15% to be offered.
But the suppliers are not losing out, said Morgan, because many of the discounts are requested a few years into a deal when the margins are high.
Yann L'Huillier, global CIO at inter-dealer broker Tradition, recently told Computer Weekly he was asking the company's IT suppliers to drop their prices. "We are going to a lot of our suppliers and saying, 'Look the world is changing and we all need to be in business…we want the same service at a lower cost'," he said.
He said most of the company's suppliers react positively to this and some are willing to reduce costs for a longer-term relationship.