The Pros And Cons With A Long-term IT Partner – Are 5+ Year Deals Dead?

In search of a middle road

Long-term IT deals were once the most realizable option for businesses in subduing high annual increases. Then came the whirlwind development of new technologies and subsequent services – factoring in progress, speed, and pervasiveness that have heralded the ever-evolving landscape businesses are competing in today.

And so, the million-dollar question arises: Are long-term deals dead, and should businesses continue to consider them? Let’s do a quick recon.

Evolution of long-term IT partnerships

The role of IT partners has transformed significantly over the years, with the need first becoming apparent in the early 1990s. But it wasn’t until the early 2000s that the demand grew exponentially. Engagement models evolved from simply outsourcing skilled individuals and expanding teams to adopting the managed services model, wherein IT partners were handed over defined scopes for specific outcomes.

Here, the heyday of the five-, seven-, and even ten-year deals marked an era where organizations and their IT partners, based on performance and accountability, maintained interdependent relationships. While enterprise clients were availed of defined service outcomes or successful large project executions, IT partners benefitted from the security of long-term revenue and exploring newer opportunities in capturing further business adjacencies.

However, the core of this partnership underwent a crucial shift.

In the initial days, technologies were relatively stable, allowing IT partners to develop the proficiency and efficiency required to meet requirements and drive better margins. Mainframes, introduced in the late 80s, can best exemplify this stability: the technology set remained constant with COBOL and RPG codes, making these systems of prevalent use for an extended period of time.

But, they lacked the agility to quickly adapt to changing business needs, and there was minimal improvement in the end-user experience. So, what led to the turning point?

Changes abound

The pace of technological change accelerated, emphasizing the need for adaptability, flexibility, and talent upgrades. The advent of Cloud platforms and SaaS offerings further accelerated this transformation, rendering experience contingent on the lifespan of technologies.

Moreover, IT partners faced an evergoing dilemma – redeploying team individuals with extensive experience to fetch better revenue or retaining them and investing in retraining. The acquired business knowledge and comfort started to dim with the constant re-shuffling in workforces. Businesses began to witness a drop in experience but were stuck in a long-term deal.
Adding to this, they were confounded by metrics that no longer aligned with current needs, causing the duration of deals to shrink.

Besides this, to maintain a competitive advantage, IT partners were required to develop various strategies that delivered low-cost products and services. Furthermore, new entrants picking up deals at low margins and invisible competitive forces like aggregator apps made old technology irrelevant, pushing existing players to rethink delivery based on changing business needs.

Rethinking partnership dynamics

While the traditional long-term contract model cannot be deemed ‘dead,’ these IT-business partnerships must be approached differently to meet modern business and technological needs. This includes undertaking strategic initiatives like:

– The focus should shift from solely driving ‘cost savings’ to ‘enabling resilience,’ fostering efficiencies through automation and emphasizing gain-sharing

– Bringing in a renewed focus on continuous training that can equip both IT and business teams to leverage the best technology solutions for tangible outcomes

– Jointly capitalizing on synergies to achieve targeted development, including sharing risk and costs and co-creating solutions

Ultimately, finding the right IT partner with a comprehensive understanding of the client’s business and objectives is crucial.

The road ahead with HTC Global Services

The past few years, given the disruptive nature of each client’s domain industry, along with the shifting technological preferences of the IT industry, have made HTC nimble and ever-evolving. We have learned that our conviction and flexibility must go together – including revisiting long-held beliefs and adapting to changing realities in the marketplace. This makes HTC a strategic IT partner that helps focus on the mid-term and long-term goals of enterprises by not just providing IT support but also enabling digital solutions that empower our clients to disrupt the industry they are in.

For instance, with investments made through our enterprise AI solutions division, HTCNXT, we are pushing the boundaries in building new engagement models that enable productivity gains powered by varied AI-based services.

Be it reducing the time and effort in testing using AI-generated (KATALON) cases and synthetic data or leveraging AI pair programmers like GitHub Copilot for auto-complete style suggestions in code, we are more than equipped to navigate complexities, deliver on your current needs, and set the stage for your enterprise’s future growth.