According to the study "Impending Contract Renewals: Back to the Future," published by Everest Group, more than $85 billion in IT contracts is set to come to end of term in the next 18 months. Many buyers signed larger contracts before the economy nosedived in 2008, which means more than $55 billion will expire in the next year and more than $30 billion will expire in the following six months.
The expirations involve a number of factors and challenges that will affect IT outsourcing contract renewals. For instance, the rapid emergence of cloud computing in the IT industry may have a great impact on data center and applications projects, the study found. Remote infrastructure management outsourcing as a model also may have a similar disruptive effect.
“Infrastructure outsourcing, data center and network tower deals make up a significant portion of the ITO contracts expiring in the near term,” said Ross Tisnovsky, senior vice president of Everest Group. “Disruptive next generation technologies, such as cloud computing, will introduce new benefits and challenges that the market didn’t see five years ago. As buyers are looking for more than just cost savings, service providers will likely find themselves fighting for renewals if they don’t adapt to new buyer preferences.”
For the study, Everest Group analyzed 2,700 outsourcing contracts that were to expire after April 1, 2012, in nine industries, four geographic regions and seven ITO towers and BP functions. The banking and manufacturing industries lead the pack in total contract value of the contracts nearing renewal.