IT Service Agreements Under PressureIT Service Agreements Under Pressure

The demand for improved accountability escalates daily. And Enron can't get all the credit for the surge. As IT budgets ebb and flow, a growing number of companies insist that IT outlays must be better justified. Among 300 business-technology executives, three in four say gaining better return on IT investments is a strategic company focus, according to a survey by information Research in December on 2002 priorities.

Yet in areas where users are driving projects, businesses find that IT services don't meet expectations, even when accompanied by an ironclad service-level agreement. Take the outsourcing industry, a market deeply affected by the decline in IT spending. Of the 300 sites surveyed, just 35% plan to outsource select IT functions this year. Only 6% report that IT consulting services and outsourcing will play such a crucial role that related budgets have received the largest budget increases this year.

Instead, 44% of sites say that money allocated for outsourcing has been cut; the area has received the largest spending decline in 2002.

Companies are finding that these contracts aren't perfect. In a separate survey also conducted in December, information Research, working with its partner publication, Optimize, polled 177 business-technology professionals at companies that worked with service providers during the last 12 months. In all, 10% blame outsourcing rifts on poorly written contracts. Almost a third report unclear performance and service-level standards as the most common failure. And 17% say the agreements weren't comprehensive enough and included unexpected add-on costs.

Lawyers are playing an ever-increasing role in protecting company interests. Yet few users among the businesses surveyed about their outsourcing experiences say it's advantageous to involve their company's legal team when negotiating an outsourcing contract. Of the 177 companies surveyed, just 5% report such involvement is the best way to avoid problems.

Has your company found itself entangled in a problematic service-level agreement within the last six months? Let us know how you overcame it at the address below.

Helen D'Antoni
Research Manager
[email protected]