Feeds

Outsourcing prices on the wane, says Gartner

Optional smiles on service

Reducing security risks from open source software

If IT vendors think that their services businesses are going to save their cookies this year, they may have another thing coming.

According to a report just released by the analysts at Gartner, prices on infrastructure outsourcing services are expected to drop this year and next by anywhere from 5 to 20 per cent on new deals. The report, which has the pithy title Potential Impact of Economic Downturn on IT Infrastructure Outsourcing Prices Q109, says that pricing pressure thanks to the economy and competition among the global outsourcing players is putting prices in a pincher.

The terrorist attacks in Mumbai, the accounting scandal at Satyam, and the weakening rupee have put particular pressure on Indian outsourcers, apparently. And you can bet that outsourcings in North America and Europe will use any lever they can to steal back some business.

"Regardless of the relative strength of outsourcing during a recession, many clients are reporting intense discussion with their vendors and renegotiation of contracts for Terms and Conditions (T&Cs) Service Level Agreements (SLAs), fees, volumes and low-cost offshore delivery locations," says Claudio Da Rold, a vice president at Gartner who tracks outsourcing. "These items are under scrutiny to identify satisfactory concessions to further reduce the cost of services on a case-by-case basis."

Gartner is not saying that will be an across-the-board reduction in outsourcing contract prices. It's saying that for new contracts - and for tough customers who are up for renewal and who are willing to shop a deal around - outsourcers are having to make price concessions.

The company's analysts left a pretty broad range of price declines, but they are something to go on if you are shopping. The company expects that the price of data center service outsourcing contracts will see prices fall by 5 to 15 per cent in 2009 and 2010. Outsourced support for desktop computers and help desk operations will see a 5 to 10 per cent decline this year and next, with network service outsourcing falling by 10 to 15 per cent and application hosting falling by 10 to 20 per cent. (It is very odd for Gartner to have such wide ranges and to have them span two years, but it is their report, not yours or mine).

Gartner says that outsourcers and their clients have to be careful not to push each other too hard. Otherwuse, they will end up being bitter on the outsourcer end (because they can't make money on the deal) and bitter on the customer side (because they get the least amount of service from the vendor to stay in compliance with the contract).

Such an enlightened attitude maybe fall victim to economic necessity, just the same. ®

Eight steps to building an HP BladeSystem

More from The Register

next story
BBC goes offline in MASSIVE COCKUP: Stephen Fry partly muzzled
Auntie tight-lipped as major outage rolls on
iPad? More like iFAD: We reveal why Apple fell into IBM's arms
But never fear fanbois, you're still lapping up iPhones, Macs
White? Male? You work in tech? Let us guess ... Twitter? We KNEW it!
Grim diversity numbers dumped alongside Facebook earnings
HP, Microsoft prove it again: Big Business doesn't create jobs
SMEs get lip service - what they need is dinner at the Club
Bose says today IS F*** With Dre Day: Beats sued in patent battle
Music gear giant seeks some of that sweet, sweet Apple pie
Amazon Reveals One Weird Trick: A Loss On Almost $20bn In Sales
Investors really hate it: Share price plunge as growth SLOWS in key AWS division
Dude, you're getting a Dell – with BITCOIN: IT giant slurps cryptocash
1. Buy PC with Bitcoin. 2. Mine more coins. 3. Goto step 1
There's NOTHING on TV in Europe – American video DOMINATES
Even France's mega subsidies don't stop US content onslaught
prev story

Whitepapers

Top three mobile application threats
Prevent sensitive data leakage over insecure channels or stolen mobile devices.
Implementing global e-invoicing with guaranteed legal certainty
Explaining the role local tax compliance plays in successful supply chain management and e-business and how leading global brands are addressing this.
Boost IT visibility and business value
How building a great service catalog relieves pressure points and demonstrates the value of IT service management.
Designing a Defense for Mobile Applications
Learn about the various considerations for defending mobile applications - from the application architecture itself to the myriad testing technologies.
Build a business case: developing custom apps
Learn how to maximize the value of custom applications by accelerating and simplifying their development.