Time to let go Multi-Year IT Outsourcing Contracts

Content Editor | July 16, 2020

Over the last few decades, outsourcing has become increasingly popular. With the rise of the start-up, finding top international technical support has become easier for entrepreneurs. While IT outsourcing comes with various benefits such as reduced labor costs, increased efficiency and the ability to quickly implement new technology, many professionals are still worried about handing their projects to third-party vendors. The novel COVID-19 has left us all in a very strange, unstable position, however, business must go on.

The economic downturn that the IT industry is facing has forced companies to outsource more of their work in order to decrease discretionary spending and spend more time focusing on their core business. However, this is the time to remain aware and change your outsourcing strategy by transitioning to project-wise contracts instead of multi-year contracts.

Why should you steer clear of multi-year IT contacts?

Buyers, in these uncertain times, might get better rates from suppliers while signing multi-year contracts. Nevertheless, here is why signing multi-year contracts is not ideal under the circumstances all of us are in:

  • Technology is changing at a swift pace and markets are becoming increasingly volatile. Being locked-in a long-term agreement comes with a risk of decreased efficiency and can prevent firms from leveraging technologies or services.
  • Many buyers might need to re-order their priority list as circumstances change and might have to cancel contracts. This will result in having to pay to heavy cancellation pays which will offset the purpose of reducing costs via outsourcing.
  • Being stuck with the same vendor for a long period of time may also result in less innovation due to absence of competition. Take advantage of the various players in the market and keep them on their feet so that they are incentivized to provide you with their best services.

 

Why go for project-wise IT contracts instead?

According to technology firm NTT’s ‘2020 Global Managed Services Report’- which is based on a survey of 1,250 executives in 29 countries-  45% organizations will outsource more than insource in the next 18 months. Moreover, 57% cited security risks as a key challenge of managing IT in-house. In this environment, opting for project-based outsourcing contracts is a smart decision due to a variety of reasons:

  • As mentioned earlier, we live in an environment with rapidly changing technology trends. Engaging in project-wise IT contracts instead of multi-year contracts will not only enable you with the choice of changing vendors who specialize in different services, but also will ensure that you can keep up with the latest technology trends.
  • You can turn the process of outsourcing into a competitive strategy by outsourcing project-wise contracts. The age of monopolization is over, and an increasing number of small IT vendors out there in the marker will ensure that you can leverage competition to obtain the best products and services for your firm.
  • As the outsourced team is focused on a particular project, they ensure prompt and quality delivery every time. Thus, your in-house team gets more time to optimize their collaboration to leverage agile methods to speed-up the marketing strategy of that particular product.

 

How to manage project-wise contracts

Without dedicated and organized management, a carefully negotiated outsourcing contract runs the risk of not being enforced.

  • Always establish your specific needs for the project clearly to the team and ask for their suggestion and approximate time to do it.
  • Discuss the improvements you expect to see and always share your thoughts and ideas with the outsourced team
  • Let your team communicate to the outsourced IT team – find out if they are going to achieve the expected goal together. Identify and bridge any IT, culture, or communication gaps between the teams.
  • Before signing the contract, pay attention to the way the outsourced company is talking about themselves. Ensure how dedicated they are and how focused they are on their success.
  • Always enquire about their toolsets, work processes, and resources. Also, try to interview the team that is going to work for your project.
  • Communicate your budget beforehand and discuss the specifics like whether after-service support is provided or not within the given budget.

Conclusion

Project-wise outsourcing offers rapid access to industry specialists, efficient workforces, reduced labor costs, and increased flexibility. However, project outsourcing entirely depends on your specific business needs; building an in-house expert team is also essential to maintain absolute confidentiality and security of your business. It is worthwhile and pays off handsomely in the long run. Building core areas by the in-house team and then outsourcing ensures success for any business.

 

 

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