IT leaders unhappy with outsourcing deals

25 April 2013

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25 April 2013 | Helen Gilbert

European IT leaders are becoming less happy with their outsourcing contracts, but admit they are partly to blame for the dissatisfaction.

A survey of 250 senior IT professionals in the UK, Switzerland, Holland and the Nordic countries found more than a quarter (26 per cent) were unhappy with at least one of their IT outsourcing (ITO) contracts and three quarters (76 per cent) were considering renegotiating or retendering two or more.

However, the report by independent sourcing advisor Alsbridge found some of the respondents accepted responsibility for their dissatisfaction, with at least two-fifths (40 per cent) of senior IT professionals admitting they left too many details to be confirmed after signing deals.

Reasons behind their desire to renegotiate or retender contracts included:

       IT outsourcing agreements failing to keep up with changing technology needs (54 per cent)

       Diminishing returns on their IT outsourcing investments (49 per cent)

       Changing business needs (46 per cent)

       Pressure to cut costs (46 per cent)

       Expecting too much from the contract (39 per cent)

       Complacent suppliers (36 per cent)

Almost two-thirds (61 per cent) of IT heads had encountered difficulty in renegotiating with an existing supplier, nearly half (47 per cent) reported outright conflict, and 40 per cent cited renegotiation as a “fractious process”, the findings showed.

In addition, 41 per cent reported difficulty in untangling their contractual terms and conditions and 39 per cent said their objectives for renegotiation were not met.

Yet, the study said respondents were still keen to fix things with their existing suppliers, with more than half (53 per cent) planning to try and renegotiate, while a quarter planned to retender their business with a new supplier.

“IT outsourcing can be a great way to cut costs and deliver value, but only if deals are done properly, Rick Simmonds, managing partner at Alsbridge, said. “But it looks like many – especially those done under extreme cost pressure during the recession – are failing to meet ongoing client needs.”

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