18 June 2009
Review your outsourced IT service providers, warns Gartner
Declining revenues and an acute requirement to protect margins mean that IT service providers could present risks to manufacturing business users.
Analyst Gartner advises that users need to understand the changing behaviour of IT service providers and take additional measures "to avoid unforeseen business and operation risks".
Says Claudio Da Rold, vice president at Gartner: "2009 and 2010 will be a critical period for the outsourcing and IT services market.
He reckons that IT service providers are facing challenges include a rise in renegotiations of multi-year and outsourcing contracts, alternative delivery models, and balancing price reductions.
With price cuts in infrastructure outsourcing predicted to move from 5% to 20% next year, he warns: "Although these potential price reductions are a positive indicator for end-user organisations, they hide a major risk for the market. As price reductions of more than 10% would be higher than the net profit of most IT service providers, they could make them bankrupt."
End-users, he suggests, should expect very different behaviour from their providers. "Struggling providers will concentrate on protecting their existing business, and reducing cost. The duration of the downturn will dictate their future."
His recommendation? That end-user organisations develop a strategic vendor relationship programme and include the following due diligence activities:
Every six months (at least) examine evidence of their investment profile, and availability of industrial offerings.
Every six months re-evaluate the health of their major providers, and do a new risk analysis.
Every 12 months (at least) re-evaluate their sourcing strategy to align to business requirement changes.
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