Contract Renewal Decisions in IT-Outsourcing: A Survey in the Netherlands

Increasingly, outsourcing companies decline to renew their contracts automatically at the end of their duration. Furthermore, only a very few contracts are renewed in sole-source contract negotiations. Switching IT outsourcing suppliers is becoming more common. Organizations send out Requests for Proposal instead and may select a new provider for their Information Technology (IT) services. The costs of selection and knowledge transfer processes, switching costs, are substantial. Service delivery continuity is also under pressure when a transfer to a new provider is made. What are the considerations in contract renewal decisions for IT services? The findings presented will be useful for client companies facing contract renewal decisions. In the current, increasingly mature outsourcing market, qualitative factors are considered most important in deciding contract renewal versus switching suppliers, as outsourcing companies are now well capable of negotiating a market-conform price. In this research project, we focus on qualitative as well as financial factors related to switching suppliers. Furthermore, termination provisions in contracts are important. How can service delivery continuity be assured while switching your supplier? This results in a framework for contract renewal decision making in IT outsourcing containing motives, switching costs, risks and contract good practices.

This research presents the findings of a survey on contract renewal decisions in IT outsourcing. Dutch-based customer organizations participated in this research project. The data for this research is collected via survey.