Financial uncertainty arising from the credit crunch is likely
to lead to many outsourcing deals being re-negotiated, reduced in
scope or terminated in 2009. And many may go into dispute, warns
international law firm
Pinsent Masons.
The firm also says that long-term transformation projects may be
delayed or terminated, in part because businesses will look to
short-term cost cutting rather than to longer-term benefits.
Iain Monaghan, a partner in the Outsourcing, Technology and
Commercial Group at Pinsent Masons, said, "Many IT outsourcing
deals come under stress during times of financial uncertainty, for
example because a better deal could be done in the depressed
market, or because the anticipated level of expenditure on
transformation is no longer sustainable.
"It is likely that there will be significant pressures on many
IT outsourcing contracts during 2009. As a result, many projects
may be renegotiated, reduced in scope, terminated or even go into
dispute."
He recommends that businesses review their current outsourcing
contracts so that they understand their options - such as get-out
clauses - and can plan the best strategy in advance.
Monaghan has written a book, Computer Contracts: the User's
Perspective, and is an expert on contract negotiation.
Some companies may use the credit crunch to outsource, though.
Last month, a report by the Management Consultancies Association,
which was based on a
survey of members of the British Bankers' Association, found
that the credit crunch will "drive a new wave of outsourcing and
offshoring in financial services as cash becomes tighter".