Summary of FindingsSpend on Commercial and Legal (excluding Assurance) functions in the outsourcing / IT services sector typically ranges from between 0.5% and 1.5% of the revenue associated with this business area. There may be special factors that cause companies to operate outside that range - for example, due to re-organisation, one company within our sample is currently operating at 0.4%, but is planning growth. At the other extreme, another company is closer to 2% due to a severe decline in revenue.Among the factors that otherwise influence cost are:• The scope of role (see more on this below)• The global / local organizational structure (most companies run some level of global structure, which typically reduces local expense)• The extent of 'shared resources' that may cover multiple business divisions, including those handling activities other than outsourcing or IT services.• The approach to cost recovery (is Commercial an overhead, or is it charged to the contract?)Of the companies identified by IACCM members as the top 10 most admired companies for contract management, 4 are in the outsourcing / technology sector. They have made substantial investments in building their contracts and commercial capabilities and, while organizational models vary, their average spend appears to be in the range 1% to 1.5%.• TPI has also produced best practice guidance around contract management. They suggest 0.8% of revenue is the right amount for post award contract management. In general, our research suggests that pre:post expense ratio is approximately 1:2 - therefore supporting the combined total of 1.2%.• Among 'the most admired companies', contracting and commercial practices are driven through a central team that also owns strategic resource within the countries. This central resource typically focuses on supporting the development of standard offerings tailored to geographic and industry segment needs and the associated delegation and documentation. Country-based resources are funded at a local level, either centrally or by the relevant business units. Some of these local resources may operate internationally to support global clients. They are focused on developing the business terms and managing / mitigating risk. Changes to 'core' terms will typically involve 'change of policy' type discussions back with the central team. These market leaders have invested in tools to help support this approach and also to take more account of the market requirements and changes in the market to keep their policies aligned with what the market will accept.• The use of offshore or outsourced resources is increasingly common. All the top performers have offshore service centers (typically in India) and some use outsourced support for both Legal and Contract Management operations.
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