Management Toolkit

IT group pushes for results-based contracts

Matthew Broersma ZDNet.co.uk

Published: 13 May 2009 14:42 BST

Organisations should look to get their technology suppliers more directly committed to their business needs as a way of cutting costs in a tough economy, according to UK IT industry body Intellect.

The organisation on Monday published a report promoting what it calls Outcome-Based Agreements (OBAs), a relatively new type of contract that binds suppliers to provide particular business results — and not just a service or product.

Such contracts are the way of the future for private- and public-sector bodies with ever-shrinking budgets, Intellect argued in the report, called A Guide to Outcome-Based Agreements: A Better Way To Do Business.

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An example of such an arrangement would be a contractor that took charge of running an airline's website and was paid based on the number of tickets sold, Intellect said.

Arrangements that pay the supplier based on the results they achieve have been used for some time, Intellect admitted, but said the current economic climate is an opportunity for them to become more widely accepted.

"The beauty of this contracting agreement is that it's not that big a step change from what we're already doing. It's evolution, not revolution," Intellect director general John Higgins said in a statement.

Intellect said that it will now look to use its contacts across the IT industry to further promote results-based contracts.

The NHS's arrangement with BT is one example of a 'shared-risk' contract. In 2004, BT said it was considering a wider use of this approach, but by January of this year, BT said it was taking a more "cautious" view of such contracts.

Richard Holway, director of analyst house TechMarketView, said in January that the NHS's results-based contracts did not provide sufficient guarantee of profits to its suppliers and that this was one factor behind the departure of contractors such as Fujitsu and Accenture from their NHS commitments.