Gartner predicts outsourcing price drop

Gartner has predicted a fall in outsourcing prices of up to 20 per cent by 2010, in what could be good news for companies that outsource their IT.

The analyst firm forecast a reduction of between five and 20 per cent based on the continued economic downturn, which will increase competition and prompt cost-focused buying behaviour.

"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, service level agreements, fees, volumes and low-cost offshore delivery locations," said Claudio Da Rold, a Gartner vice president.

"These items are under scrutiny to identify satisfactory concessions to further reduce the cost of services on a case-by-case basis."

Gartner said that the cost of datacentre services could fall by between five and 15 per cent, network services between 10 and 15 per cent, and application hosting services between 10 and 20 per cent.

"It is important to remember that price reductions will apply with great variability across geographies, vertical industries and client size with regard to specific deals," said Da Rold.

"Providers are not reporting any across-the-board price reductions, but rather will address each client situation individually."

Gartner warned that customers pushing for prices which are too low could affect the quality of the services provided and the relationship between provider and client.