What outsourcing clients really think

There's something to be said for keeping the contracts simple

Companies are approaching outsourcing contracts with renegotiation in mind by creating leverage through strategies such as price benchmarking claw-back and blue-sky clauses, according to a survey by IDC.

Aprajita Sharma, IDC's Australian manager for outsourcing and BPO, said: "This finding is primarily driven by the need for flexibility to redefine the contract and minimise the risk. However, customers need to bear in mind that short term selective outsourcing contracts with blue-sky clauses may provide flexibility within the scope of services, but will not be very price competitive when compared to traditional outsourcing contracts.

"Despite the prevalence of this multi-sourcing trend, the traditional outsourcing suppliers like IBM, EDS, and CSC ended up signing longer term, highly bundled, multi-tower contracts in 2007.

"IBM managed a sweeping victory over its competitors when it came to ranking customer perception of being a leading outsourcing player. IBM has reinforced this with some high profile strategic deals signed with National Australia Bank, Commonwealth Bank, and others within the government segment," Sharma added.

The report also found that:

  • Security issues with revealing internal processes have become bigger issues with organisations in 2007 compared to the previous year;
  • Respondents have placed "solid communication" as the highest importance within an outsourcing relationship; and
  • Overall, the results indicate a high level of activity within the applications maintenance/management and development space in large organisations.

Len Rust is publisher of The Rust Report

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