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Barely a year ago, both companies had inked a 10-year contract where CSC would provide infrastructure support services for Sears' desktops, servers and networks. But the retail giant decided to cut short the deal on grounds that CSC had failed to perform some of its obligations.
While this announcement, at first glance, seems to validate the views of those who believe that single-vendor deals don't work, other industry reports suggest the broader market isn't doubting its workability just yet.
For example, in the same month of Sears' announcement, the Bank of Queensland extended its 10-year IT outsourcing pact with EDS by another two years. The contract will now expire in 2014.
So, are single-vendor deals still in vogue?
If market numbers by the outsourcing advisors at TPI are anything to go by, single-vendor deals are definitely still being pursued--and sealed.
According to TPI's latest quarterly industry index, one megadeal was signed in the first quarter of 2005--the same number that was signed in the same period a year ago. Last year's first-quarter megadeal value was 1.6 billion euro (US$1.9 billion), compared to this year's contract of 2.4 billion euro (US$2.9 billion).
The small number is not to be mistaken for low market interest. Duncan Aitchison, TPI's international managing director, explained: "Historically, notwithstanding an exceptional 2003, the first quarter is usually light in terms of megadeal awards. This is because the fourth quarter typically closes the year with large contracts and high volumes.
"Half of the past 10 first quarters were one-megadeal quarters," he noted.
Aitchison said it would be inappropriate to try to make any market predictions based on the first-quarter report card. "We do not draw any broad conclusions about megadeals from the first quarter's light showing. Nor would we draw conclusions about the full year of total contract value anticipated," he said.
In fact, 2004 is an indication that actual results can be way off from an initial prediction. TPI recorded one megadeal in the first quarter that year, and 2004 went on to "set a new record for total contract value awarded", Aitchison noted. TPI saw a total of 19 megadeals for the full year.
Aitchison said TPI currently has seven megadeals in the pipeline. "More than the number at this time last year," he added. "We also know of others in the industry."
Does this put an end to the debate over the nature of future outsourcing deals? Perhaps. But for CIOs who are considering the outsourcing path, and are undecided if single-vendor or multi-vendor sourcing is the better option, the ultimate choice shouldn't matter.
Success, as most outsourcing veterans will preach, depends on the people involved in the business arrangement. Like a marriage, an outsourcing partnership succeeds when both parties share similar aims, both are willing to give-and-take and are continuously working together to achieve their shared goals.
So even if everyone else has chosen multi-vendor sourcing, but you've found your match and the deal is sweet, you may just be able to pull it off going with a single vendor.
biography
Isabelle Chan is senior editor of CNETAsia's News and Business Technology group.
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