Gartner Monday forecast that the prices of outsourced IT services will shrink by 5% to 20% during 2009 and 2010, due to the "economic climate, IT budget constraints and general market consciousness." The firm expects the biggest price reduction to come in the cost of outsourced network services and application hosting services.

IT buyers today are renegotiating contracts to alleviate costs, the firm says.

"Regardless of the relative during a recession, many clients are reporting intense discussion with their vendors and renegotiation of contracts for terms and conditions (T&C), service-level agreements, fees, volumes and low-cost offshore delivery locations," said Claudio Da Rold, vice president and distinguished analyst at Gartner, in a statement. "These items are under scrutiny to identify satisfactory concessions to further reduce the cost of services on a case-by-case basis."

This trend, while accelerated by the recession, was inevitable, analysts say, as outsourcing contracts developed with traditional pricing models often didn't deliver the expected results.

"Everyone went through the first round of outsourcing and in most cases it was a wasted effort. Enterprise IT departments aren't handing the keys over to outsourcers anymore," says James Staten, principal analyst at Forrester Research, who last week delivered a keynote address on the subject at Forrester's IT Infrastructure and Operations Forum in Las Vegas. "Now enterprise IT buyers are considering the business requirements and more options when fulfilling business needs."