Currency Crunch?

Filed in archive Outsourcing Issues on October 8, 2009

© Jake Wasdin

Given the weakening dollar, we may be heading toward some challenges to existing deals caused by the decreasing strength of the U.S. dollar. The pain of these changes will not be felt equally, as some deals have currency-adjustment provisions that favor the client, while other deals have provisions that favor the supplier. Assuming that these clauses are enforced to their fullest extent, some deals may become economically unfeasible for clients while others may become unfeasible for suppliers.

Neither situation will prove positive. While those customers with substantive protections may cheer, it is possible that the margin for the supplier could erode to the point that the deal is no longer profitable. Similarly, customers may see their value proposition change to the point that a deal isn't viable.

Still, it is important to remain aware of these issues (and the currency provisions) when doing offshore services agreements.