Market research firm Gartner Group has warned end users that the shortage of Year 2000 skills means IT services companies can well afford to turn down business, pushing the cost of such deals ever higher.
Rita Terdiman, research director at Gartner (part of Dataquest), urged end user companies to move quickly if they intend to sign up a service company or pay a high price for delaying. "Organisations that do not contract for Year 2000 services in 1997 will pay a premium of up to 100 per cent to obtain leading service vendors," she warned.
According to Gartner research, in 1995 the cost of Year 2000 projects was around 20 per cent less than in 1996, as suppliers wooed clients in order to establish a reference base in this field. But in 1997, costs will be anything up to 50 per cent higher than in 1996. "It?s become a seller's market and prices are going up dramatically," noted Terdiman.
Things are likely to get worse in 1998 when public sector projects get under way in earnest, forcing the cost to twice as much as today. "At the start of 1999, when it is probably too late, there will still be projects and companies entering the market," she added. "The cost will be at least three times the cost of starting today."
She said that many of the leading suppliers - including IBM and the Big Six consultancies - have already begun being highly selective about which deals they sign up for. "There are reports from users that they just can?t get suppliers to come in and talk to them about Year 2000 deals," explained Terdiman.
The alternative is to settle for second best. "[Users] will be forced to choose from less experienced vendors that still have personnel available or they will have to manage these efforts themselves with offshore and supplemental staff," explained Terdiman.
But second best will not necessarily mean cheaper. "Although offshore providers current provide services at 40 per cent of the cost of local [suppliers], this difference will disappear with regard to Year 2000 projects," predicted Terdiman. "At best, the cost savings will be 10 per cent by 1998."
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