Like all things, good or bad, an outsourcing relationship will inevitably have an end. In this case, it is essential that the parties are appropriately prepared and have agreed on how to handle the customer’s transition away from the supplier. In this note, we set out our top 3 tips for dealing with termination assistance issues.
(1) Agree on a termination assistance plan as early as possible
Problems are invariably easier to deal with if they have been anticipated and planned for in advance. As such, even when an outsourcing relationship is working smoothly, the parties should be working on a plan for dealing with termination assistance issues should they ever arise. In this case, when the relationship does eventually come to an end, the parties can promptly start to implement pre-agreed termination assistance activities with a minimum of fuss.
From the customer’s perspective, there are many advantages to agreeing on a termination assistance plan while the relationship is working well. In particular, while there is still plenty of goodwill between the parties, the supplier should be relatively co-operative and sympathetic to the customer’s concerns. However, once the relationship has broken down and the supplier is on the way out, it may be far more difficult to get the supplier to dedicate any time and attention to agreeing a reasonable termination assistance plan.
(2) Consider termination assistance issues when designing the service structure
Different service structures can affect the practicalities of termination assistance. Accordingly, the customer should consider termination assistance issues when deciding on its preferred service structure.
For example, where a customer is outsourcing a hosting service, there may be a number of different options available to it. These may include the use of dedicated servers that will hold the entirety of the customer’s data and the use of shared servers that will hold the customer’s data along with data of other customers. Clearly, the first option has several advantages when it comes to termination assistance, as it should be a relatively easy task to transfer the data from the dedicated servers onto new replacement servers. On the other hand, with the second option, disengagement may be far more complicated as the customer’s data will need to first be separated and extracted from the other data that may be stored on the shared servers.
Of course, disengagement issues are not always the most important and there may be other more compelling reasons for preferring a shared server solution. Nonetheless, it is important for these concerns to be considered when deciding on the original service design.
(3) Agree a clear position on who should pay for termination assistance
Termination assistance is really just one of the package of services that the customer will be purchasing from the supplier. The supplier will incur costs in providing the termination assistance and, as for the other services it provides, can reasonably expect to be paid for doing so. Despite this, customers are sometimes reluctant to pay for termination assistance, particularly where they have terminated an agreement due to the poor performance of the supplier. In this case, the aggrieved customer may feel that termination assistance should be provided for free as compensation for the trouble that the supplier has caused.
While it is easy to feel sympathy for the customer in this scenario, the customer should be careful to not compound its problems by removing any remaining incentive for the supplier to cooperate in the transition-out. Without the prospect of any ongoing work or termination assistance fees, the supplier may well be reluctant to commit any significant time or effort to the disengagement process. This may slow the process down and simply cause further trouble for the customer. To avoid this, the customer should be prepared to pay a fair amount for the termination assistance it receives.
In fact, the customer may even be able to use the prospect of separate termination assistance fees as a lever in other negotiations on price, by arguing that the service provider should discount its ordinary service fees in order to remove any premium that it would normally include to cover the eventual costs of disengagement.