The prices CIOs pay for IT outsourcing services can grow drastically out of sync with the market after the first year of the deal--especially today, when IT outsourcing prices are dropping dramatically. Here's how to keep your IT outsourcing costs in line during year two and beyond.

You can't blame IT outsourcing customers for breathing a sigh of relief as they enter the second year of an IT services contract. The transition is over and steady state begins.

But something else begins to occur in year two of an outsourcing deal. Your prices can become drastically out of sync with the market, especially today. IT outsourcing prices have been dropping an average of 15 percent a year, according to outsourcing consultancy Alsbridge's ProBenchmark unit, thanks to outsourcer price cuts, aggressive use of offshore infrastructure management, hardware price declines, better management, and increasing use of virtualization. In some industries, such as retail, outsourcing prices have been dropping even more dramatically, says ProBenchmark's director of outsourcing and benchmarking services Howard Davies.(...)

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