Prices for outsourced IT services are likely to fall by 5 to 20 per cent during 2009 and 2010, according to analyst group Gartner.
The decline, for UK, European and US companies, will be driven by the economic downturn, IT budget constraints and increasing consciousness of general market conditions among end users.
Gartner highlighted increasing competition between traditional and new providers as more providers will push down prices.
“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, vice president and distinguished analyst at Gartner.
“These items are under scrutiny to identify satisfactory concessions to further reduce the cost of services on a case-by-case basis.”
Da Rold said that Indian offshore providers have been coming under significant proce pressure following the Mumbai terrorist attack, the scandal at Satyam, rupee exchange rate fluctuations, and continued wage inflation and attrition levels.
Potential; average outsourcing price reductions 2009/2010
- Data centre services: 5% to 15%
- Desktop/help desk services: 5% to 10%
- Network services:10% to 15%
- Application hosting services: 10% to 20%
Garnter said it made its predictions by using measures such as price points, and benchmarks of the price reductions associated with the last recessionary period (2001 to 2003) and added current trends and current price/cost measures.
Gartner analysts then calculated the percentage proce changes based on the economic pressure or recession, and other applicable trends, including industrialisation of services, clients' SLA/T&C renegotiations and offshore service dynamics.
The future of 0utsourcing will be discussed at Gartner Outsourcing & IT Services Summit 2009, 15-16 June, in London