IDC warns service providers to be wary of sneaky outsourcers

A recent report titled 'Why are Organisations Signing Outsourcing Contracts with Renegotiation in Mind?' found that during rebid cycles in 2007, 55 to 60 percent of outsourcing contracts in Australia were renegotiated.

This was due to organisations and service providers putting in measures to define clear outcomes from an outsourcing relationship, said Aprajita Sharma, IDC research manager outsourcing and BPO.

“There is still a general perception that expectations on the scope and levels of service delivery are not being met," she said.

"IDC believes this is also due to organisations being unclear on what to expect from the end results, hence, are unable to clearly define the outcomes for the service providers before contract signing."

The report also showed that in 2008 renegotiations will represent a slightly smaller proportion of total contract value (TCV) and will stabilise between 2008 and 2010, accounting for 35 to 45 percent of business signed.

"One of the main reasons for renegotiation is the client's initial expectations of outsourcing and the resulting contract that is negotiated between the parties," Sharma said.

"If clients do not have a solid understanding of their own IT function and performance, or lack a focused IT strategy, then their expectations of outsourcing will be misplaced," she said.

He also predicted there would be increased outsourcing activity in 2008 and 2009. This despite the average contract size shrinking by about 10 percent over the last two years.

“Increased activity in offshore outsourcing, which is driving down price levels for service offerings, is enabling organisations to purchase more services within the same IT budgets," Sharma said.