2012 IT Outsourcing Trends: Some Good, Some Bad

The 2012 IT outsourcing trends will include some good news for CIO’s and some bad, even for CIO’s not currently using IT outsourcing. The 2012 IT outsourcing trends reflect an updated business strategy for the IT outsourcing and managed services industry still recovering from the economic downturn. In fact it is also likely you will see many of these same trends in other forms of outsourcing such as business process outsourcing.

What follows is an aggregation of IT outsourcing trends from a couple of different sources, mostly firms that track the sourcing industry.

2012 IT Outsourcing Trends

  1. Renegotiating Contracts: IT outsourcing vendors are expected to seek renegotiating contracts mostly to reclaim the concessions given in 2008-10
  2. Weaker Contracts: New contracts and renegotiated contracts are expected to reflect fewer obligations for the outsourcing provider along with fewer and reduced liabilities.
  3. Push to Cloud Services: Cloud services will be used increasingly in the delivery of IT outsourcing by vendors to trim costs and further improve their service models.
  4. Increased Offshoring: More domestic IT outsourcing vendors will turn to offshore resources in search of better margins from labor arbitrage.
  5. Business Unit IT Outsourcing: Business unit shadow IT, or rogue IT, organizations will begin using IT outsourcing provider to fulfill their needs.
  6. Smaller Deals: Mega it outsourcing is giving way to smaller deals and renewals changing hands more frequently with vendors using a ‘penetrate and radiate’ strategy.
  7. Convenience Sourcing: Customers will pay premiums on convenience IT outsourcing services favored by vendors for the higher margins and a foot in the door.
  8. Higher Prices: Many vendors will be looking to raise prices through contract provisions or renegotiating contracts.

IT Outsourcing Price Hikes

Not long ago the Everest Group released a very concise report Time to Take a Hike? Why pricing inIT deals should stay the same. The report forecasts IT outsourcing providers will move for price hikes in 2012.

The report goes on to detail the three main arguments vendors use to justify pricing increases and the counter arguments customers should use to avoid paying more. This insight can be incredibly useful to customers in contract negotiations. Since it’s only 9 pages you have no reason to not read it.

The Everest Group will be holding a webinar on Thursday entitled 3 Reasons Why Your IT Deal Pricing Should Not Change based on this report which should be worthwhile for any IT manager or IT procurement specialist responsible for an outsourced function.

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5 Responses to 2012 IT Outsourcing Trends: Some Good, Some Bad

  1. Great post – it ties together a number of the trends we’ve seen at RecoVend (www.RecoVend.com) since we’re building a free purchasing platform for departments in Higher Ed. With the exception to the higher prices that vendors will attempt to charge, these all tend to swing more power to the schools during the sourcing and negotiating process. It might cost some in-house developers their jobs, which is unfortunate, but given the comparative cost efficiency with many of the new SaaS applications, it’s a no brainer. Colleges and universities must have tighter fiscal control going forward, throughout every department, but right now they don’t have the tools to share information and collaborate on purchase requirements across departments quickly and easily. With more and more purchases made outside of the core IT department that impact campus IT, tools like these will be crucial for administrators to stay abreast of what is going on across departments, and help one another to make the most informed, most cost effective choices for IT outsourcing.

    • The Higher Ed CIO says:

      Business process outsourcing is a growing area of interest for functional managers who realize outsourcing is not just for HR, payroll and IT anymore. It is true many sourcing vendors have found ways to leverage cloud services or offshoring to be more competitive on price and will not be looking to raise prices. It does appear the more traditional IT outsourcing providers may be the ones more likely to look for increases in 2012.

  2. Kyle James says:

    Since you bring up outsourcing we are running a survey this month on .eduGuru around the State of Outsourcing in Higher Education.
    http://doteduguru.com/id8017-survey-the-state-of-outsourcing-in-higher-ed-2012.html

    I plan on sharing the results in the middle of April. I think that this will be a report that you will find VERY interesting. I’d love for you to fill it out and any help that you can do in promoting to your audience to get them to take it too would be greatly appreciated.

  3. Pingback: 10 Tips for Successful IT Outsourcing

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