According to research firm Gartner, prices for application hosting services to fall by 10 to 20% and for network services to fall 10 to 15%. It sees prices for data centre service dropping 5 to 15% and help desk services 5 to 10%

"These are not `price list reductions' but represent an overall price reduction on infrastructure outsourcing deals that may apply to new deals and, albeit only partially, to renegotiated deals," said analyst Claudio Da Rold. "This fall in prices will occur due to increasing competition in the market between traditional and new providers as more providers compete aggressively to keep revenue growth on target, while ensuring margins. It’s important to remember that price reductions will apply with great variability across geographies, vertical industries and client size with regard to specific deals. Providers are not reporting any across-the-board price reductions, but rather will address each client situation individually.”


Many customers have already starting talking tough with their providers in a bid to get a better deal.“Regardless of the relative strength of outsourcing during a recession, many clients are reporting intense discussion with their vendors and renegotiation of contracts for Terms and Conditions (T&Cs) Service Level Agreements (SLAs), fees, volumes and low-cost offshore delivery locations,” said Da Rold.“These items are under scrutiny to identify satisfactory concessions to further reduce the cost of services on a case-by-case basis.”

But he added that businesses should not to try and negotiate for the lowest price on new outsourcing contacts.Not accepting a renegotiation of terms and price in a tough economy will not contribute to client’s viability. Also, especially in hard times, there is only one viable balance and that is win-win; for if one side loses, the other loses too. "It will not make providers safer, deliver good services or promote a positive relationship.”

India has been one of the most popular areas for outsourcing operations, but Da Rold believes the country will be hard hit by the price falls. Indian offshore providers "have been coming under significant pressure for pricing reductions due to the Mumbai terrorist attack, the Satyam scandal, rupee exchange-rate fluctuations, and continued wage inflation and attrition levels.”