• How to get out of a bad IT services contract

Just as with marriages, IT outsourcing contracts always start with the best of intentions. The best relationships blossom and flourish, but there are those that don’t make the cut. If you find yourself in a bad outsourcing relationship, you must find a way out. Here are some things to consider:

Spot the warning signs

The first step in getting out of a bad contract is to recognise that you’re in it. All too often, companies work with bad service providers for years because they’re distracted and don’t take stock of the service they’re getting.

Look for red flags such as consistently high levels of unplanned downtime that break your service level agreements. Look at how well your service provider communicates with you and whether it follows through adequately with queries. Does it check to ensure that everything is operating as planned?

Watch for recurring issues that seem fixed, but then aren’t, as surveyor Callum Morris Powles experienced. Finally, consider the level of service you’re getting. An outsourcing provider should be a strategic partner. Do you get value from the regular service review meeting, or does it sound more like a service call?

If you’ve decided that you’re not happy with your contract, there are three main steps to take. The first is to prepare yourself for the conversation. The second is an attempt at fixing things. The last resort is to admit defeat and leave.

Prepare yourself

Before you begin, build a case for the conversation you’re about to have. This means documenting the things you’re unhappy with, ideally using a list of incidents that have occurred. Record all meetings and correspondence and bring the relevant evidence from these meetings to the table. Are there things that the service provider promised but didn’t deliver?

Make sure your case is watertight. Map these shortcomings against the termination provisions in your original contract. Hopefully, they will show a clear case for ending the contract, should it come to that.

Try to fix it

It’s better to fix something if possible than break it entirely. Have a frank conversation about what needs to change. Restate what you expected when you came into the contract. Your provider is likely to want to continue the relationship and may want to make the changes you ask for.

Exit

If your provider is unable or unwilling to meet your needs, then it’s time for the nuclear option: leaving. The key here is to do so without finding yourself in breach of contract and subject to potentially hefty penalties. If you’ve prepared your case properly, you’ll be on better ground.

Begin by just asking politely for an amicable termination. The provider may want to avoid legal fees and reputational damage by quietly cutting ties.

If things get nasty and the provider wants to penalise you, then you’ll need some expert backing. Ensure your legal team is on hand to assess your position and potential costs. Even if you don’t have a case for termination, it may still be worth doing. Conduct a financial analysis to see whether the cost of a penalty is worth the money you’ll save or the performance you’ll gain by moving to another provider with a better contract.

Have an exit plan

However the separation from your outsourcing provider plays out, the most important thing you should have in your back pocket is an exit plan. Even in an amicable termination, the provider may feel little incentive to help you with the transition, so ensure that you have a business continuity plan while you get hold of any data in the vendor’s possession and replace critical services like data networks. If your provider has access to any passwords or digital keys, ensure that you have access to them somehow, or at the very least a backup of the data to a site under your control.

Breaking up is always hard to do, but with some pre-planning, you can make it a painless form of conscious uncoupling rather than a rerun of the War of the Roses. That’s an important factor, as it will leave you free to run your business while minimising the drama.