Shorter Term Global Sourcing Contracts & Smaller Deals to Continue in 2009
The trend toward shorter-term contracts and smaller global sourcing deals is expected to continue in 2009. Last year, large IT contracts started to become obsolete, as more companies started gravitating to smaller deals with multiple vendors. This practice, known as multi-sourcing, allows companies to reduce the risks attributed with mega global sourcing contracts. Shorter-term contracts also give companies the opportunity to assess the performance of the arrangement, without getting locked into a lengthy contract.
The article, “Multi-sourcing –Minimizes Risks Associated with Large Global Sourcing Contracts,” discusses some of the key benefits of smaller deals. For example, it is difficult to find one vendor that can successfully provide a variety of services. When smaller deals are made with multiple vendors, the IT company has access to a wider range of resources and expertise. In addition, it is easier to sever an outsourcing relationship when there is a smaller deal, as the IT company can avoid becoming dependent on the vendor.
Shorter-term contracts help alleviate some of the anxiety associated with global IT sourcing. The majority of IT agreements last anywhere from five to fifteen years. With a shorter-term contract, IT executives can feel more comfortable knowing that if the arrangement is not what was expected or if outsourcing is no longer a good fit, they are not locked into a long-term contract.
The recent economic uncertainty has also caused more IT executives to take their time in signing outsourcing contracts, which has led to longer negotiation cycles. Even though IT companies are looking for ways to quickly cut costs, a goal that can be accomplished with global IT sourcing, at the same time, these organizations are measuring the risks and benefits.
When an IT company begins considering global IT sourcing as an option to reduce costs and increase productivity, executives need to think about the goals for the upcoming year or more. A quick decision should not be made just to reduce expenses. Global IT sourcing has a lot to offer, but it is not a good fit for every company. Once the decision has been made to outsource, it is difficult to come back from it if the firm changes its mind. A global sourcing strategist can help organizations weigh the benefits and risks of global outsourcing. Contact A&E Consulting, a full service consulting firm, at 661-200-3612 or info@AandEConsulting.com for more information.
Tags: global IT sourcing, global sourcing, outsourcing, shorter term contracts, vendor