Outsourcing grows - but deal size shrinks

Outsourcing is set to continue, with more organisations handing over at least one IT function during the next year, but the scope and length of many agreements will also be reduced, according to a new report.

The research, by analyst firm Meta Group, claims 80 percent of organisations will outsource at least one function by 2005.

But the Outsourcing Pricing Guide report also warns that many of the 70 percent of that number renewing outsourcing deals will drive a harder bargain this time around, cutting both the scope and duration of contract.

The report also warns that companies are risking their outlay on outsourcing agreements unless they pay more attention to factors during the initial stages of an agreement.

Most of this is common sense, but the advice includes entering an outsourcing agreement with the correct expectations and negotiating contracts with service levels that align with primary objectives and equitable pricing.

Dane Anderson, senior research analyst at Meta Group, said in the report: "Although outsourcing is clearly a strategic decision, the tactical and operational implementation of an outsourcing agreement often neglects many of the fundamental elements required for success."