The Headlines
Journalists and competitors give special attention to the public failures of any outsourcing transaction. Given the number of outsourcing transactions, many cases of failed deals litter the archives of the courts and shareholder communications. For parties considering an outsourcing, the probability of failure can be reduced significantly through “best practices” on outsourcing procedures.
Occasional Litigation
Regrettably, outsourcing generates litigation. However, compared to other areas of commercial activity, outsourcing tends to escape public disputes.
The Impetus for Amicable Dispute Resolution
Is outsourcing different from other commercial transactions? Several unique forces may be at work.
Arbitration and ADR
Parties may avoid litigation by preferring arbitration, particularly in international outsourcing. Alternative dispute resolution (“ADR”) includes mediation, where the parties submit to the non-binding recommendations of a neutral expert or experts, who may seek to negotiate a compromise.
Shared Responsibility
The failure of an outsourcing may be traced to root causes shared by the parties. In that case, each party is likely to lose goodwill and face lose of reputation. Executives at enterprise customers may have neglected to provide the necessary support for managing the outsourcing process, or multi-sourcing, which could call their responsibility into question and generate shareholder claims.
Discreteness and Amicable Terminations
Most service providers realize that a disgruntled former customer is happier being moved to another service provider than suing. Disputes about termination fees can be resolved by negotiation or exchange of rights in return for a release of claims. Where the enterprise customer is simply trying to escape an agreed large termination fee, this avenue may result in a negotiated termination fee if the service provider might have failed to achieve customer satisfaction or other performance goals.
Professional Advice
Enterprise customers have obtained professional advice on governance and relationship management. Using this advice and available service level management tools, there is now a greater level of accountability and trust due to transparency of performance.