Question B: How can we transition out early from an outsourcing arrangement?

Our advice: Outsourcing is a growing industry with annual revenue estimated at more than $150 billion for on-shore, near-shore and off-shore outsourcing. From an IT management perspective, the following are typical "wants":

The contractual and operational matters inherent to any outsourcing deal are complex, time consuming, and costly if not addressed early with attention to detail, and managed properly thereafter. Measurements are the primary means of determining the success or failure of the outsourcing agreement. If appropriate measurements aren't in place (e.g., performance-based metrics {schedule, service levels, milestone deliverables, timeliness, etc.}, quality metrics, and other key indicators) when the program begins, the contract cannot be managed effectively.

The appropriate time to identify disengagement triggers, options, roles, and responsibilities is during the contract negotiation. Contracts should include specifics about what will happen if metrics don't meet agreed-upon expectations, and should address the following questions: Who owns any physical equipment, software licenses, and intellectual property? Who pays for it? How much does it cost? Who is responsible for it? How will it get transitioned? How will it be measured? What happens to it at contract termination?

The end-of-contract options include: renegotiate again with the current vendor or multiple vendors, choose another vendor or vendors, or return to in-sourcing. Any of these options involve spending time, money, and effort. It also pays to be aware that no amount of contractual boilerplate can protect against problems incurred by neglect, poor management, poor communications, and poor requirements and plans. Senior management should assure that the team managing the vendor has the requisite skills for the job.

If you want to transition-out early from an outsourcing agreement, one of the best ways is to identify and document lack of performance based on the measurements and criteria identified in the contract. Another way is to negotiate a deal with the vendor to terminate the contract, and determine what it would cost (in time, resources, and dollars) and if it's justified.

-- Gad Selig

Beth Cohen, TAC Thought Leader, has more than 20 years of experience building strong IT-delivery organizations from user and vendor perspectives. Having worked as a technologist for BBN, the company that literally invented the Internet, she not only knows where technology is today but where it's heading in the future.

Gad Selig, TAC Expert, has more than 30 years of diversified domestic and international executive, management, and consulting experience. His background includes marketing, operations, business development, systems and network integration and outsourcing, CIO, project management, process innovation, and IT strategy and governance. He has published two books and more than 30 articles. He is an associate professor of management and technology and director of the Center for Business Information Technolo gies at the University of Bridgeport.