IT outsourcing prices to fall says Gartner

BANGALORE, INDIA: IT research and advisory firm Gartner has predicted on Monday that the outsourcing prices will dip up to 20 per cent by 2010 due to the current economic downturn and technology budget constraints.

"This fall in prices will occur due to increasing competition in the market between traditional and new providers as more providers compete aggressively to keep revenue growth on target, while ensuring margins," Gartner said.

Furthermore, cost-focused buying behaviors in the current economic phase will be a key factor behind the reductions for IT infrastructure outsourcing services from 2009 to 2010, with a great variability based on each single deal, it said.

According to Gartner, the cost of datacentre services could fall by five to 15 per cent, whereas network services could fall by 10-15 per cent, and application hosting services by 10-20 per cent.

"These are not 'price list reductions' but represent an overall price reduction on infrastructure outsourcing deals that may apply to new deals and, albeit only partially, to renegotiated deals," analyst Claudio Da Rold said in a statement.

"It is important to remember that price reductions will apply with great variability across geographies, vertical industries and client size with regard to specific deals," he added.

Da Rold observed that Indian offshore providers have been coming under significant pressure for pricing reductions due to the Mumbai terrorist attack, the scandal at Satyam, rupee exchange rate fluctuations, and continued wage inflation and attrition levels.

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