Outsourcing prices to dive 20 per cent

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Prices for outsourcing will fall between five and 20 per cent over the next year, according to Gartner, suggesting it's not as recession proof as many believe.

The analyst firm said the strained economy, budget constraints and “general market consciousness” will combine to cut prices, alongside increased competition from different providers.

Across North America and Europe, Gartner predicted that prices for outsourced data centre services would fall between five to 15 per cent over the next year or so, with help desk services falling between five and 10 per cent.

Outsourced networks would see an average price reduction of 10 to 15 per cent, while application hosting was expected to fall between 10 to 20 per cent.

Claudio Da Rold, vice president and distinguished analyst at Gartner, said in a statement: “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.”

“These items are under scrutiny to identify satisfactory concessions to further reduce the cost of services on a case-by-case basis,” he added.

India, traditionally an strong point for offshoring, has seen additional price pressures following the scandal at Satyam, exchange rate fluctuations, wage inflation and even the Mumbai terror attacks, Da Rold said.

While such price cuts might sound like good news for those firms looking to outsource their IT, Gartner warned that pushing prices too low will hurt the quality of services as well as working relationships.

It noted that “especially in hard times, there is only one viable balance and that is win-win; for if one side loses, the other loses too.”

Click here to read our top tips for cutting back during a recession.

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