Dealing with repeated contract breaches in IT outsourcing. Can you salvage the vendor relationship?
Have your say on navigating tricky IT outsourcing issues. Your experiences could shine a light on vendor relationships.
Dealing with repeated contract breaches in IT outsourcing. Can you salvage the vendor relationship?
Have your say on navigating tricky IT outsourcing issues. Your experiences could shine a light on vendor relationships.
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Dealing with repeated breaches of contract by an outsourced IT provider is a significant challenge, but there may be a chance of saving the relationship, provided effective and timely action is taken. The key to determining whether the relationship can be recovered lies in the supplier's willingness to address the issues, take corrective action and maintain a constructive dialogue between the parties. Saving your relationship with an IT outsourcing provider who has repeatedly breached your contract is possible, but it requires careful and decisive management. It is essential to set clear expectations, monitor performance closely and maintain constant communication.
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Start by engaging in open communication with the vendor to identify root causes and align expectations. Set up a Performance Improvement Plan (PIP) with clear milestones, timelines, and corrective actions. If needed, renegotiate contract terms to balance scope, timelines, and penalties, ensuring both sides are committed to recovery. If the vendor shows improvement, continue monitoring closely; otherwise, consider transitioning services or adopting a hybrid approach. A repaired relationship demands continuous oversight and proactive governance to prevent future issues.
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Something that shouldn't be overlooked is that the contract might be the problem. When the parties are engaged in a highly leveraged standard procurement process, it's very easy to overreach on the contract and for vendor to accept terms they shouldn't. We can argue all day about whether a vendor should do that, but we can also argue all day about whether they should be put into a position like that to "win". At the end of the day, the client wins the contract negotiation but loses any chance they have of meeting their objectives. So my best advice is to listen to the parties without assigning blame to start. It may be that a combination of vendor performance and rethinking certain contract terms may be in order.
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Breaches & relationship are two different aspects within the contract. Breaches need to be looked at in isolation and need to check the attitude & willingness of the vendor to fix the root cause of the breaches. If the vendor is in a casual approach and only doing lip-service on breaches, even best of relationship can not salvage the contract. If the vendor is showing genuine concern and acting / taking steps to fix the breaches, outsourcer need to work with the vendor to fix the issue and strengthen the relationship.
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Repeated contract breaches can become a real nightmare for a client. More importantly, if the client belongs to a highly regulated business, e.g. banking, insurance, healthcare etc. There is more than one way of dealing with this problem. The starting point is of course the contract itself. How tightly is it drafted in favour of the client? Contractually, client can seek liquidated damages (service credits) for the breach. Repeated breach should ideally allow the client to terminate the contract for cause and seek refund of the fees retroactively + damages. Of course, these need to be called out in the contract.
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Según mi experiencia, una de las primeras cosas que no debemos olvidar quienes somos los que contratamos el o los servicio(s), es que existe una "promesa" basada en aspectos técnicos, RRHH, y financieros. Esta formula hace que el contrato que uno firma esta basado en elementos objetivos que dan sustento a la confianza sobre la ejecución del proveedor. Ahora bien, tampoco hay que olvidar que el contrato de servicios responde a una necesidad concreta de los usuarios de la empresa demandante, son ellos los principales beneficiados o perjudicados al hacer uso del servicio, y es con ellos con los primeros que tenemos que tener compromiso. No sirve tener un mal servicio por tratar de salvar un contrato que perjudica a mis usuarios y la empresa.
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Why is it not working? If it’s truly vendor failure then deal with it, but poor performance is poor performance. Don’t keep trying. If, however, it’s a structural problem then rework and resolve. Competition delivers value and better price, it can also generate aberrant and uncommercial behaviour. For example, BIG deals skew behaviour. I did an outsourcing review some years ago. Long term, very big numbers - so competition was fierce and final margins low. In the end the services couldn’t be delivered for the price - so the vendor wore penalties. Recovery was possible but the cost of remediation was more than the penalties. The buyer wouldn’t move, the vendor wouldn’t invest. In the end the buyer wore poor performance for 3 years.
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A wise and very successful negotiator once told me you get to the end of the negotiation and both parties are not smiling then not far down the road neither will be smiling. Try asking the vendor what the issue is and then work together on how to remedy the issue. Too many times I hear the contract being quoted. If you reach the point where the contract is the centre of discussions and meeting the specifics of that then it’s already a lost cause.
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When facing repeated contract breaches with an IT outsourcing vendor, I take a balanced approach. First, I assess whether issues stem from technical challenges or a misalignment of expectations. If the vendor has a history of strong performance and shows commitment to improvements, we can consider salvaging the relationship with clear metrics and timelines for accountability. However, if breaches reflect systemic issues or a lack of commitment, controlled termination may be necessary. Our vendors are extensions of our team, and we must ensure they align with our standards to maintain service reliability and protect our reputation.
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