IT strategy - Taking pleasure in pain.[QQ].

(From Financial Director)

Byline: Tom Berry, deputy editor of Financial Director.

Since the technology sector has hit hard times, many clients have renegotiated their contracts with IT suppliers, capitalising on increased competition in the market as technology giants fight for corporate IT budgets. Suppliers must now share the risks of IT implementations with their clients, and performance-related pay is commonplace for even the largest IT companies.

Outsourcers have been some of the hardest hit, often having to renegotiate deals in which they have had multi-million pounds of asset exposure at risk of losing contracts altogether. In 2004, EDS, one of the powerhouses of IT outsourcing, was forced to renegotiate massive contracts, such as its $7bn deal with the Navy Seals in the US, and lost a lucrative contract with the Inland Revenue in the UK because of performance issues.

But failure to deliver on multi-billion dollar contracts is not the only opportunity clients have to eke out some extra cash from IT suppliers. Market upheaval and boardroom shenanigans in the IT sector, while bad news for technology companies, are an ideal opportunity for cost-conscious finance directors to throw their weight around.

It may well be time, for example, for clients of PeopleSoft to revisit their software strategy after Oracle's successful acquisition of the ERP vendor in January. Oracle has publicly committed to supporting PeopleSoft products until 2013, but rivals such as Microsoft Business Solutions and SAP will be clamouring to get themselves on supplier shortlists for disgruntled PeopleSoft customers. Bargain basement deals and fierce competition for access to finance directors' wallets are sure to follow.

Maybe UK executives should seize the opportunity to play hardball with IT hardware and service giant HP following the departure of its CEO of five years, Carly "the most powerful woman in business" Fiorina.