Coronavirus Putting Many IT/BPO Contracts at Risk: Everest Group

BPO and IT services providers are staring at the prospect of losing many existing contracts, with countries after countries closing borders and imposing travel restrictions in a bid to contain the outbreak of coronavirus, according to consultancy firm Everest Group.

Many contracts cannot be renewed unless executives from both the firms hold a face-to-face discussion.

“Companies simply cannot buy complicated services without some form of travel,” writes Peter Bendor-Samuel, CEO of Everest Group, in a blog on Forbes.

With the virus spreading at high speed, corporate companies are closing their gates, and canceling events and meetings, with some of their employees starting to work from home.

“In the IT and BPO services industry, decision-making is stalled, and we already see clients canceling planned contracts.” he wrote.

The worst-hit are hospitality, travel, and energy industries, which are likely to scale back their investment in technology or will seek a deep discount in fees from service providers.

“In these industries, we expect companies to cancel more contracts and potentially look for discounts and help to get through a very difficult time,” says Samuel.

During recessions, companies usually outsource many of their jobs to cut costs, but this is a different kind of economic slowdown caused by the virus. The demand for goods and services is less likely to rebound until the world invents a vaccine and contains the outbreak of the virus.

“Hopefully, this will pass as summer comes, and a vaccine becomes available. But it’s unclear how long the pause will last,” Samuel wrote.