Outsourcing is by now an established and attractive tool for businesses trying to increase productivity, but outsourcing and near sourcing guru Jeff Andrews has important advice for businesses to ensure that working agreements remain profitable throughout the lifetime of an outsourcing agreement.

In a column penned for NearShoreAmericas.com, Andrews describes how problems can arise in just about any long-term service agreement. However, a well-defined

contract can address the kind of problems that typically arise in service agreements. Andrews writes: Disagreements over the scope of the services, static pricing that fails to remain competitive, and the service provider’s failure to deliver promised innovation and performance improvements can lead to increased costs that erode the profitability gains achievable through outsourcing. To address these problems, customers should include provisions in their contracts that comprehensively define the scope of the outsourced services, provide for service evolution and continuous improvement, and provide for pricing resets tied to changes in market prices.

Andrews, a partner in the Houston office of the global law firm of Thompson & Knight LLP, notes in Industry Today magazine the rise in so-called near sourcing as a competitive and attractive option for U.S. companies that have traditionally looked to India and China for services. The outsourcing of functions from the United States is shifting again – and a growing number of those jobs are returning to the Western Hemisphere. The emergence of a growing middle class in India, spurred in large part by the growth of the outsourcing industry, has meant that outsourcing providers are now rigorously competing with other service and technological industries for labor. Outsourcing providers in the subcontinent have been compelled to increase wages to attract and retain employees, and these profitability pressures are leading companies, including Indian-based providers, to establish service centers in Central American and South American countries.