Stick or Twist? The IT Contract Renewal Dilemma

Stick or Twist? The IT Contract Renewal Dilemma

You’ve just received a reminder that your existing IT outsourcing contract is coming up for renewal, and you’ve heard on the grape vine that the supplier is likely to increase their prices by 15%.

What do you do?

You’ve been with this service provider for 4 years. The service has been acceptable, if not brilliant. They’ve always delivered and maintained the service.
A procurement process is time (and money!) consuming, and might only drive a lower price rather than a more impressive service.

Tendering could work. But you can’t be sure what criteria to focus on or what service elements are worth paying more for. The last tender took nearly 6 months to complete…

How, where, and who delivers IT services is one of the most important decisions an executive can make.

Technology underpins almost every business process. The impact of getting it wrong is measured in more than a few lost customers; it can affect share price, reputation and, in some instances, careers.

https://www.reuters.com/business/bank-ireland-fined-245-mln-euros-over-it-failures-2021-12-02/

According to figures from ISG, contracts worth a total of $18.5bn (£14bn) are due to expire in 2022.

The issue is understanding where you should be investing your money to reduce your risk and improve the service. In short, how do you achieve demonstrable “Value for Money”?

Using the consumer motor insurance industry as an example, research suggests that half of all drivers could save 23% on their premiums if they perform market comparisons. If even a fraction of that saving, say 5%, can be uncovered through similar objective comparisons, business consumers of IT services could be on track for at least £700m of savings.

For most businesses, the only model that exists for comparison is the procurement and tendering process, and that means changing focus from the core business, researching other suppliers, and starting a costly and time-consuming tender process.

However, a recent survey by Deloitte discovered that over 50% of participants found that third-party advisors added value during strategic assessment, business case development, RFP / vendor selection, market testing, negotiation and contracting.

The key to making such a model work, is trust and independence. It’s essential to know that the advice offered is completely unbiased. Next, you must have the confidence that the model truly and fully reflects your requirements and conditions and has sufficient breadth. Comparison needs a large pool.

Given the importance of the decision to be made, and the potential benefits of change against the risk of doing nothing, what’s stopping you using independent comparisons to inform your renewal dilemma?

To see some examples of organisations we’ve helped with their sourcing requirements, please see our case studies.
And if your outsourcing contracts are coming up for renewal, please contact us today for an independent perspective on your options.
ImprovIT are an independent business and technology consultancy. We were founded by former colleagues of Gartner, IBM and HP to help senior IT leaders make the critical decisions that will maximise their technology investments. We’re completely independent and impartial specialists in the use of IT Measurement, Modelling and Benchmarking.