Outsourcing remains an important tool for CIOs, consuming a full quarter of IT budgets, but they could be smarter about negotiating contracts. For example, it seems counterintuitive that CIOs aren't using the tough economic climate to cut better outsourcing deals. Though some may be locked in by long-term agreements, CIOs would do well to review current contracts to make sure they're getting the best terms possible. CIOs can also make headway on costs by consistently watching the hidden costs of outsourcing, such as vendor searches and contract management. IT executives with opportunities for handing off IT or business functions can also consider some targeted pilots to see if outsourcing can help them scale up, and down, their IT capabilities during an economic downturn—something few seem to be considering now.

This article was originally published on 05-15-2002
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