With somewhere between 48% and 62% of total IT expense flowing outside firms to vendors, the IT supply chain and associated contracts determine an organization's technology economics. The terms of the contracts themselves, specifying duration, termination conditions, fees, costs, volumes, service levels and such, play a major role in shaping the foundation of a company's “fixed versus variable” cost structure. The built-in assumptions underlying these contracts - such as that volumes will grow and unit costs will decline at the rate of current technology advances - were likely sound at the time the deals were done, but are likely not valid in the long-term. And the very nature of many past contracts, with long terms and termination penalties, renders them an impediment for companies that need to transform their technology economies to adapt to the new normal of the financial services sector. As such, organizations trying to move forward are more likely to spend time... Read full story on Wall Street & Technology

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