Feeds

Brace yourselves, IT suppliers: You'll be squeezed HARDER next year

It's no fun being an outsourcer

Internet Security Threat Report 2014

IT law specialist Clare Murray of Pinsent Masons, the law firm behind Out-Law.com, said that cost-cutting requirements and the changing needs of organisations are behind a rise in the number of IT outsourcing contract renegotiations. She said she expects the trend to continue.

"Customers are under pressure to cut costs and are looking to their suppliers to help them achieve this," Murray said. "The way that the Cabinet Office has conducted negotiations with suppliers is a high profile example of this."

"Customers are therefore seeking to renegotiate the terms of their contract. They are setting the challenge to suppliers, what can you give us? Suppliers are under pressure to preserve the relationship and their revenue stream," she said. "They need to demonstrate what they can do to support their customer and why their customer is not better off exploring cheaper alternatives."

"Suppliers are offering to reduce their prices or to introduce new technology or efficiencies to deliver more for less. In return customers are often willing to vary the scope of the services and/or extend the term of the contract." Murray added.

Murray was commenting after a sourcing advisory company, ISG, said that 44 per cent of all outsourcing contracts agreed on in the first three months of 2012 were renegotiated contracts, according to a report by Computer Weekly.

Steve Tuppen, director at ISG, said that 15 per cent of the total number of IT outsourcing contracts in the first half of this year were restructured contracts worth at least €20m, according to the report.

"Where there have been supplier performance issues this can provide leverage for customers in renegotiations," said Murray. "However, supplier performance issues in themselves can also trigger renegotiations to contracts."

"Both customers and suppliers want to avoid expensive competitive procurement processes," she said. "As contracts come to an end customers are renewing their existing arrangements with their suppliers and renegotiating the terms to take account of their future requirements, such as moving the delivery of services to the cloud. Customers are saying to their suppliers, 'we have cut out the cost of retendering for this work, so we want to see the benefit of that in your offering."

"In cases where customers are moving to single-sourcing to multi-sourcing models, renegotiations with suppliers tend to centre on three things: how suppliers can assist in restructuring the services ahead of the re-procurement of those services; how suppliers can assist in facilitating the phased transition to a multi-sourcing model; and in how suppliers can help in working with new suppliers as they are brought in," Murray said.

Copyright © 2012, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

Secure remote control for conventional and virtual desktops

More from The Register

next story
Facebook pays INFINITELY MORE UK corp tax than in 2012
Thanks for the £3k, Zuck. Doh! you're IN CREDIT. Guess not
Big Content outs piracy hotbeds: São Paulo, Beijing ... TORONTO?
MPAA calls Canadians a bunch of bootlegging movie thieves
Google Glassholes are UNDATEABLE – HP exec
You need an emotional connection, says touchy-feely MD... We can do that
Just don't blame Bono! Apple iTunes music sales PLUMMET
Cupertino revenue hit by cheapo downloads, says report
US court SHUTS DOWN 'scammers posing as Microsoft, Facebook support staff'
Netizens allegedly duped into paying for bogus tech advice
Feds seek potential 'second Snowden' gov doc leaker – report
Hang on, Ed wasn't here when we compiled THIS document
Verizon bankrolls tech news site, bans tech's biggest stories
No agenda here. Just don't ever mention Net neutrality or spying, ok?
prev story

Whitepapers

Why cloud backup?
Combining the latest advancements in disk-based backup with secure, integrated, cloud technologies offer organizations fast and assured recovery of their critical enterprise data.
Getting started with customer-focused identity management
Learn why identity is a fundamental requirement to digital growth, and how without it there is no way to identify and engage customers in a meaningful way.
High Performance for All
While HPC is not new, it has traditionally been seen as a specialist area – is it now geared up to meet more mainstream requirements?
New hybrid storage solutions
Tackling data challenges through emerging hybrid storage solutions that enable optimum database performance whilst managing costs and increasingly large data stores.
Mitigating web security risk with SSL certificates
Web-based systems are essential tools for running business processes and delivering services to customers.