chapter  11
23 Pages

Termination of the Outsourcing Relationship

WithJohann Rost

Only a few outsourcing scenarios continue indefinitely. All others end sooner or later; they are limited to one or more projects, or they are designed for a certain period of cooperation. The customer should retain the ability to terminate the relationship with the vendor and continue its business with another provider or bring the services back in house. This step requires access to key personnel and to technical material such as source code and documentation. Contractual provisions are important, of course. Experience shows, however, that contractual provisions alone are not enough to meet the requirement of business continuity after finishing the outsourcing relationship. The exit plan must also include careful management of in-house know-how and practical business decisions, e.g., maintaining leadership in essential business relationships.

These conditions seem obvious; nevertheless, they cannot always be taken for granted in practice. In many outsourcing relationships, the customer’s dependency on the vendor constantly grows until it reaches an extent where the customer cannot go on anymore without the vendor. In this case the customer cannot easily escape this binding relationship — even if it is not necessarily legally binding and the contract includes provisions for termination of the cooperation.

252 If the buyer is not really in a position to end the relationship, this vulnerability might turn to its disadvantage in time; the vendor might change its pricing strategy or decrease its service level.

A recent poll shows that it is anything but rare that IT services have to be brought back in house (see Figure 11.1). In May 2005, <uri>www.cio.com</uri> conducted a poll among its readership regarding services that have been brought back in house in the last year.