IT outsourcers feel 'locked in' to contracts

20 June 2013

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20 June 2013 | Marino Donati

More than a third of senior IT professionals feel ‘locked in’ to outsourced supplier contracts, with most finding it difficult to renegotiate deals, according to research.

Just under two thirds of respondents to a survey by independent sourcing adviser Alsbridge said they did not believe their IT outsourcing (ITO) suppliers would be approachable about renegotiating contracts, with almost half thinking they would “kick up a fuss” if they tried to.

The survey also found that 71 per cent of respondents said they lacked the necessary information to renegotiate. As a result, 39 per cent felt “locked in” with their existing ITO suppliers.

Alsbridge managing partner Rick Simmonds said that IT suppliers were right to kick up a fuss if clients were moving the goalposts. “However, if the business need or the technology world has changed, then it is incumbent on suppliers to be receptive and not keep their clients in the stranglehold of an outdated contract,” he added. “This applies even more when the contract is nearing its end of term, when everything should be open for reshaping.”

The study surveyed 250 senior IT decision makers from the UK, Switzerland, Holland and the Nordic countries. More than half said benchmarking clauses in contracts did not work. Over 50 per cent also said they did not have an overarching sourcing strategy in place, while 42 per cent said there was no formal review point in contracts.

Simmonds said that having access to current market data was vital to develop a strong business case for change. “IT leaders shouldn’t feel confined by their contract benchmarking clauses. Going out to the wider market and applying informed commercial pressure as a contract reaches a break point can be very effective,” he said.

More than half of those quizzed said they planned to appoint a bigger or more skilled negotiation team, with just under half planning to start the renegotiation process earlier.

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