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The cost of some outsourced IT services is expected to drop by 5 to 20 percent, according to Gartner, Inc. The reason: to the uncertain economic climate, IT budget constraints and general market consciousness.
Gartner said that this fall in prices will occur due to increasing competition in the market between traditional and new providers as more providers compete aggressively to keep revenue growth on target, while ensuring margins. Furthermore, cost-focused buying behaviors in the current economic phase will be a key factor behind the reductions for IT infrastructure outsourcing services from 2009 to 2010, with a great variability based on each single deal.
"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 (T&Cs) Service Level Agreements (SLAs), 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."
Mr. Da Rold added that Indian offshore providers have been coming under significant pressure for pricing reductions due to the Mumbai terrorist attack, the scandal at Satyam, rupee exchange rate fluctuations, and continued wage inflation and attrition levels.
Application hosting services will chow the sharpest declines—10% to 20%, Gartner says. It projects network services will drop 10% to 15%; data center services 5% to 15% and desktop/help desk services 5% to 10%.
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