Plan an escape route when negotiating contracts


Plan an escape route when negotiating contracts

Christian Annesley

Financial services firms should ensure they have a viable exit strategy from any outsourcing contract, delegates at last week's Intellect Financial Services Outsourcing Conference were told.

Jonathan Cooper-Bagnall, a partner at PA Consulting, said companies needed to approach negotiations with suppliers with an awareness of the possible pitfalls. Even once a contract was signed and the terms set, he said it was imperative that exit planning be reviewed periodically.

"All the detail of how an exit from a contract would be managed needs to be in the contract. A good mechanism is to refresh your exit plan every six months to ensure it remains relevant," he said.

Crispin O'Brien, UK head of technology at KPMG, said there was a growing awareness that contracts needed to change over time.

"You cannot assume things will stay still. It is a dynamic world and contracts must take account of that uncertainty," he said.

O'Brien cited the case of two large firms that had outsourced the bulk of their services and were forced to abandon a planned merger because they were unable to reconcile their respective outsourcing contracts.

Tim Gibson, director of Fujitsu Services' UK business, said a supply firm like his paid a lot of attention to the exit position. "It can ruin a business if you have not done it properly," he said.

"There is a growing awareness on all sides that you need well-defined exit provisions. You need good contracts that deal with the technical and business challenges posed."

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