When a process outsourcing company enters into a contract with a service provider, it has set its own objectives on what is to be achieved at the end of the process. There is, however, no guarantee that all or any of the goals will be achieved. Due to some shortcomings, the company may feel that it is not getting what it bargained for and want to terminate the contract before the contract expirers.
While terminating the contract, the process outsourcing company should not go directly into cutting ties with the provider since it might fail; a lot of factors need to be considered. First, look at the provider’s economic status since the contract is being terminated before the end of the agreed period. Bear in mind that premature termination of the contract might leave a provider stranded financially since it had invested a lot of money in the outsourced task. The service provider might also decide to seek legal redress for the breach of contract which might not go well for the company.
A process outsourcing company should further notify the service provider well in advance of its intention to terminate the contract. Make sure you have already prepared the termination fee as agreed upon prior to partnering, however this can be complicated if there was nothing of this sort agreed upon. Never rush into terminating a contract with the service provider if it will be the ultimate loser, as the company may take stringent action which may harm your business in the future.
Always have a budgeted transitional plan in place because moving from one provider to another or to an in-house programme. This is always expensive to a process outsourcing company. The company will in the long run realize that outsourcing is cheaper than transitioning since the latter comes with its own challenges that might require more money and time. An intelligent company will always have a plan B as an alternative in case the current contract crumbles before it is fully implemented. Again, never terminate a contract when you are not sure who will take over the process.
The process outsourcing company should at all times have a good communication plan so that the termination of a contract does not develop into a shameful circus. The provider might prefer using the media to pin down the company over breach of contract thus the need to have an in-house communication plan. The company must also be flexible to accommodate the interests of the provider. For example, if the provider asks for some time to source for another client give him a short extension which will develop into a win-win situation.
Daven Michaels Author of the book Outsource This!