'Go Long,' Says Ingersoll-Rand with Outsourcing Contract Extension


One of life's oldest and truest truisms is that there are exceptions to every rule.


As I wrote back at the beginning of the year, while shorter outsourcing contracts with multiple suppliers have largely supplanted lengthy contracts with a single large provider, the latter kinds of deals do still occur.


One of the latest examples: a 10-year, $551 million extension of Ingersoll-Rand's outsourcing contract with Affiliated Computer Services. As Computerworld reports, Ingersoll-Rand will move the IT operations of Trane, Inc., a company it acquired in June, to ACS.


Several factors I cited in my earlier post appear to be in play here. Gartner has predicted that some early adopters of multi-sourcing will consolidate their suppliers to reduce service integration costs and also to benefit from stronger relationships. Longer contracts also tend to work better for companies seeking some kind of business transformation, says Charles Collier, managing director of EquaTerra.


While Ingersoll-Rand's relationship with ACS, begun in 2002, got off to a rocky start, it now seems pretty solid, based on comments from Ingersoll-Rand CIO Barry Libenson. He says he sees no difference between Ingersoll-Rand's internal IT employees and the ACS team assigned to his company. ACS account managers "work pretty hard to make me successful," he says.


Libenson admits that many of the early mistakes in the relationship were on Ingersoll-Rand's end. His company didn't understand "the level of complexity and the resources needed on our side in managing the relationship," says Libenson. (That's a common mistake, as I've written before.)


Cost is always a consideration in outsourcing relationships. ACS offered financial incentives to Ingersoll-Rand for the contract extension, the article notes. And it also included provisions that will enable Ingersoll-Rand to shorten the contract life, if desired.


With the uncertain economy, it won't be a surprise to see more providers offer similar deals to their clients to lock them into longer deals. Of course, the economy may actually improve providers' business. In a recent survey, Forrester Research found that demand for outsourced services is growing.