Three rules for switching outsourcing providers

07.02.2006
Outsourcing arrangements are often modified in midstream. For example, adjustments in performance levels allow the customer to stay current with changes in technology that occur over the years.

But the customer's expectation of change may go even further -- namely, the customer may try to end the relationship and move to a new provider before the agreement has expired. This may be true even if the existing provider has not actually breached the agreement, e.g., when the customer perceives that the provider is nonresponsive to new requests. In such cases, customers sometimes consider buying out the existing service provider.

How should the parties handle the transition to the new provider? It is useful to keep three words in mind: professionalism, pricing and personnel.

Professionalism

Following the letter and the spirit of the existing outsourcing contract is a good rule of thumb. The current contract should contain terms that enable the parties to begin the conversation regarding a transition in a businesslike manner. Despite the awkwardness of the situation, the parties should act professionally.

Why? Practicality. From both parties' perspective, lack of cooperation or undue resistance exacerbates the difficulty of ending the relationship before the contract was set to expire. Although it is easier said than done, rehashing bad memories of a missed service level or unfair feedback should be avoided.