IT Outsourcing: Don't Force Your Customers To Look For A Change

A few years back, IT Services deal renewals were usually to the incumbents. However, it is now estimated that approximately 2/3rd of multi-year IT Services contracts are opened to competitive bidding by customers and incumbents are losing about 50% of the deals coming up for renewal.

- Khem Aithani

Organisations avoid changing IT Suppliers, particularly those suppliers who are engaged in multi-year services deals. The reasons are many, but major ones are:

1. Change brings discontinuity and disruption, which is avoidable

2. Change is costly

3. Current supplier comes to understand the customer and its systems and processes well, and a change will mean loss of ‘accumulated knowledge’

4. Supplier change is a major initiative and diverts CIO’s time and energy away from the more critical digital transformation agenda

Why is it then that IT Services industry analysts and advisors state that customers are increasingly changing their strategic IT Services suppliers? A few years back, IT Services deal renewals were usually to the incumbents. However, it is now estimated that approximately 2/3rd of multi-year IT Services contracts are opened to competitive bidding by customers and incumbents are losing about 50% of the deals coming up for renewal. This supplier churn comes with other changes to the landscape of outsourcing- deals are being broken into smaller chunks and contracted for shorter lengths.

WHAT ARE THE REASONS CUSTOMERS ARE BEING ‘FORCED’ TO RECONSIDER THEIR LONG-TERM SUPPLIERS?