Outsourcing up, rates down

According to Gartner research, the number of IT outsourcing providers is going up--but prices will drop between five and 20 percent through 2010. According to the survey, providers are already seeing more competitors coming into the field. Although prices have not been affected, Gartner believes that it's coming.

The drop in prices will come as a result of increasingly aggressive competition, especially from new providers. As more new providers get into the business and compete on price, established VARs will have to step up their efforts to compete on value-add and service.

Gartner says data center services will drop between five and 15 percent; desktop/help desk services between five and ten percent; network services between ten and 15 percent; and application hosting services between ten and 20 percent.

Everybody loves a bargain, of course. That's why dollar stores are the only retailers doing any good these days. But VARs must be cautious of becoming the "dollar store" of the IT world, delivering only cheap commodity services, and buyers must be similarly aware that cheaper prices don't necessarily mean equivalent services for less.