Outsourcing: Contract Disagreements are Projected to Rise as Credit Crunch Bites

The financial indecision that occurs from the credit crunch is likely to lead to many outsourcing deals being renegotiated, reduced in scope, or terminated in 2009. The International Law Firm Pinset Mansons warns the industry that many investors would probably go into dispute.

The Law Firm also stated that long-term transformation projects may be delayed or terminated because businesses will most likely look at short-term cost cutting rather than at the longer-term benefits.

Many IT outsourcing deals come under pressure during times of financial uncertainty. This is because a better deal could be done in the depressed market or the anticipated level of expenditure on transformation is no longer sustainable.

Pinset Mansons recommends that businesses review their current outsourcing contracts so they would understand their options such as get-out clauses. They may also plan for the best strategy in advance.

Some companies, however, may use the credit crunch to outsource, it was reported yesterday and was found out that the credit crunch will "drive a new wave of outsourcing and offshoring in financial services as cash becomes tighter".