As Prices for Outsourced Desktop Support Drop, Some IT Shops Get Shafted

Prices for outsourced desktop support have been decreasing steadily over the last three to four years, but some recent rock-bottom deals may be too good to be true.

In the last year, some IT shops have signed new outsourcing contracts for desktop support with prices ranging from $20 and $24 per device per month, according to Ben Trowbridge, CEO of outsourcing consultancy Alsbridge. Yet current benchmarked prices for full desktop support are two to three times that, ranging from $54 to $70 a month, according to data from Alsbridge’s benchmarking division ProBenchmark.

[ For more articles on the cost of outsourcing, see Outsourcing Prices: Why the Recession Isn’t Really Driving Them Down, Outsourcing Prices Falling, Buyers Getting Savvier and Credit Crunch Changes Economics of Outsourcing. ]

Several factors may be causing the drop in prices for outsourced desktop support, says Trowbridge. Niche providers and offshore vendors have entered the market, offering more aggressive pricing, which in turn pressures traditional players such as IBM Global Services and EDS to reconsider their rates.

Furthermore, because many desktop services can now be provided remotely, outsourcers can offshore support more cheaply. “For example, not too long ago, if a server needed to be rebooted, a person had to manually touch the machine to reboot,” says Trowbridge. “Advancements in remote infrastructure management technology now allow the server to be rebooted from a separate location with no physical access required. For desktop services, remote functions have become more of a reality today.”

The global recession may be having an effect on desktop support pricing, too. Existing outsourcing customers are scrutinizing their costs, and having laid off employees and reduced their desktop assets, are renegotiating not just for lower prices but for a more limited scope of service, says Trowbridge. That may also cause prices to decrease.

Anticipating the commoditization of desktop support services, outsourcers had already made a number of changes to their service offerings over the last few years in order to offer lower prices while maintaining profit margins: For example, they standardized hardware, locked down user configurations, and quietly unbundled services typically included in desktop support.

A full-service desktop support configuration normally includes asset management, software break/fix support, tier two problem resolution, LAN administration, email, premise network, system monitoring tools, hardware maintenance, file and printer servers and devices, and all IMAC (install, move, add, change) services.

“Over time, larger components of service became unbundled from the overall desktop configuration—components like service desk and e-mail,” says Trowbridge. Those were big chunks of services amounting to more than 10 percent of the cost of a typical desktop support configuration. Today, IT service providers have gone further, slicing off even thinner slivers of service such as tier two service support and IMAC, in exchange for lower prices. And IT executives charged with cutting IT costs have shown an increased tolerance for cutting such corners.

The problem with unbundling desktop support services, however, is that there’s no longer a clear definition of full desktop support. Some customers may be getting lower prices for a reasonable level of service. But others will find they have sacrificed too much in the name of savings. “Extremely cheap prices reflect a lower level of support and a shifting of the burden to customers for some service components,” says Trowbridge. “Our analyses show the best improvements in efficiency (standardized configurations) and delivery structure (offshore and remote infrastructure management) yield, at best, 20 percent savings.”

In addition, desktop support pricing, which had been coming down about ten percent a year, should sink another five to 10 percent this year, according to Gartner.

But if you’re signing a deal with a cost of less than $45 a month per seat, beware. An IT service provider may come to the table with an incredible deal, but the fine print may reveal that it only includes remote break/fix service for hardware and software and charges a variable fee for hands-on service. The scope of work the supplier does not provide will still need to be done either in-house, by another provider, or by the original outsourcer for more money. This fact may entirely defeat the purpose of outsourcing desktop support in the first place.

In addition, not every customer may be prepared for the additional risk mitigation required when offshoring desktop support. “If a disaster strikes, then coordinating a response to a distant location becomes more difficult,” says Trowbridge. “Customers should ensure that continuous disaster recovery testing and business continuity planning occur as part of the agreement.”