A Structured Approach to Negotiating Information Technology Outsourcing Agreements

S. Chandar and J. Zeleznikow (Australia)


Outsourcing, Information Technology, Structured Negotiation.


It is becoming increasingly difficult for organisations to achieve strategic advantage through Information Technology outsourcing. Expectations of benefits and the significance or "business value" placed on them – remain very high. However, research conducted by Gartner shows that more than 50% of Information Technology Outsourcing agreements fail to achieve a satisfactory outcome. Failure has also been linked to a poorly drafted contract. Negotiation of an Information Technology Outsourcing agreement is not an intuitive, ad-hoc process. Nor is it a procurement process, where negotiation can occur predominantly on price. Understanding the complex organisational, strategic and operational changes that need to take place in an outsourcing endeavour is imperative to the negotiation process. An organisation is most likely to benefit from outsourcing if it understands exactly how the outsourcing vendor will provide value and can use that knowledge to effectively negotiate an agreement. This paper reviews issues relating to Information Technology Outsourcing negotiations. It describes a project underway to build a structured framework for effectively negotiating Information Technology Agreements.

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