The Long and Short of Contracts

Useful insights about IT outsourcing in a CNET special feature on outsourcing in Asia. “The other side of outsourcing” shares the service provider perspective. Aside from explaining how providers prefer long-term contracts because it ensures they'll make a profit on the contract (by compounding the savings on efficiencies over time), it also discusses the reality that a misquoted outsourcing contract can cost more money than it brings in over the long run. How does that happen? By making wrong assumptions about the client situation.

The story quotes Ramon Jocson, general manager for Asean/South Asia at IBM Global Services, as saying: “You won't be able to know 100 percent all the things that you need to know. You probably know about 60 percent of what you need to do, and then you need to take a risk when you take the contract.”

One analyst also observes a trend that may pose even greater challenges to providers: shorter-term contracts. They'll be looking at ways to “make money in a much shorter period. Often after the first 12 months,” says Craig Baty, group VP and chief of research at Gartner Asia-Pacific.