Gartner warns of hidden dangers in cheap outsourcing

Users should watch out for deals that look too good to be true when signing new IT outsourcing contracts, according to analyst...

Users should watch out for deals that look too good to be true when signing new IT outsourcing contracts, according to analyst group Gartner.

Speaking at the Gartner IT Services and Sourcing 2002 conference in London, Roger Cox, vice-president of sourcing management at Gartner, said: "If the services contract is heavily discounted, you are probably not getting the A-team, but rather the back-benchers who aren't already out on billable projects."

Cox urged users to consider how a contract would run over a number of years. "Companies need to ask themselves if the 'good deal' they are signing in 2002 or 2003 is likely to be a 'good deal' in 2003 or 2004. Many will not."

"Companies will need to take the majority of blame for signing bad deals," he added. "In many cases, the people who signed the deal, having achieved cost cutting objectives on paper, move on after 18 months and don't have to face up to the difficulties which usually occur after 18 months."

According to Gartner businesses are establishing long-term sourcing relationships based on current short-term cost-cutting goals. The risk in this strategy is that the business can later be trapped in a highly dependent and inflexible agreement.

Such long-term agreements usually lack the flexibility to accommodate the dynamic nature of today's business environment. Gartner warned that inflexibility would end up costing businesses more in the long term.

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