During the severe economic recession, many IT departments entered into poorly planned outsourcing contracts, and now the companies are paying the price in terms of lower service and lower technology. This problem was brought to light when Alsbridge released its recent report entitled, “Terms of Endearment – We Need to Talk.” These problems are most prevalent in IT departments in the United Kingdom, Switzerland, Holland, and the Nordics.
According to the report, 26 percent of IT department leaders are unsatisfied with at least one of their IT outsourcing (ITO) suppliers and are considering renegotiating or re-tendering the contract. Forty percent of senior IT professionals believed they had left out too many key elements of the contract before signing. Fifty four percent felt that the companies they contracted with for outsourcing were not keeping up with the changing technology needs. Forty nine percent saw lower returns over the course of time from their ITO investments.
Managing partner of Alsbridge, Rick Simmonds, likened the problem to Samuel Johnson’s famous quote, “Marry in haste, repent at leisure.” When the contracts are well planned and thoroughly constructed, ITO can reduce operating costs and deliver high value to the company. However, during the extreme financial pressure to perform with steep budget reductions, too many companies failed to predict their ongoing needs when entering into ITO contracts.
According to Simmonds, if your IT department has a good relationship with their ITO supplier and the supplier is competent to deliver good service, you can renegotiate the contract. If not, then you need to know what the ITO market is currently capable of offering so you can begin to look for another supplier which can offer the technology and services you need.
Alsbridge, the creator of the report, is a leading outsourcing consulting firm. It advises on $5 billion in outsourcing contracts per year.