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Cost-cutting drives 'could affect outsourcing relationships'
Businesses that attempt to make short-term savings by cutting back on outsourcing costs could be putting themselves on course to fail, a new report has warned.
Research conducted by the global consultancy firm Compass found that British companies are now demanding discounts of anything between 15 and 23 per cent for their outsourced services.
In addition, a number if UK firms are attempting to secure discounted deals in exchange for agreeing to long-term contracts, the study also found.
However, while such a policy could potentially lead to short-term savings, Compass has warned Britain's chief information officers (CIOs) that they could end up putting too much pressure on outsourcing vendors and could even put operations in jeopardy.
"A 20 per cent cut across the board could drive many contracts to failure," explained Geraldine Fox, of Compass. "Clients are plucking aggressive price targets from the air with no due diligence around the competitiveness of existing service and with no regard to what the business needs."
"The priorities have clearly shifted,"; she added. "Until recently, clients considered strategy and future requirements when undertaking a renegotiation. Today, cost cuts are increasingly at the top of the agenda."
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