In India, service sector is the largest contributor to the nation’s GDP.
Numerous vendor contracts are entered via several financial institutions (software systems; operational systems; document platforms; electronic banking services, etc.). This need has led to the growth of vendor contracts as organizations streamline their operations and look to leverage technology’s capacity for innovative solutions. This results in a dynamic business climate with both challenges and opportunities. In these conditions, there is a considerable value for service providers with protection provided by well-drafted service level agreements. Some of the challenges faced by this industry are:
- Feeble man, not the firm: Task of reviewing vendor contracts are often assigned to those who are technically sound with the particular operation in question, not to those concerned with contractual terms. This creates a knowledge gap and can have adverse effects on the firms capabilities.
- Focusing more on cost metrics: Vendor contracts often executed by bank management with little or no consideration given to contractual terms.
- Verbal Contracts: Vendors are often trusted implicitly, although the wording of contracts may vary significantly from provisions discussed orally (onward contracts contain terms which render previous oral discussions irrelevant).
- Defining Service Level Agreement: Improper due diligence i.e. acknowledging what your organization actually need. Directly endeavoring on how to address service or product failures.
- High consultancy cost: Also, SMEs lacking vendor governance are not willing to spend money on third-party consultants and hence, unable to perform efficiently.
- Embedded trust on Third-Parties: The agency providing consultancy may be biased, which can damage the offering party to a great deal.