Five Risk Factors in Outsourcing Agreements

Abstract

This article highlights the most important risk factors for outsourcing projects. Recent international case law is discussed, to illustrate the do's and don'ts of outsourcing. Although outsourcing deals seem to mature more and more, the lessons to be learned from these cases are still very much up to date. The IT outsourcing market has matured in the past years. Many IT outsourcing relationships are fruitful and long lasting. Nevertheless international surveys continue to show that numerous outsourcing deals are untimely terminated in the first two to four years. This article highlights the five key risk factors for failure of IT outsourcing relationships. These key risk factors will be underlined by various international failed outsourcing case law. Such case law probably only represents the top of the iceberg. Most problematic outsourcing relationships are terminated under strict confidentiality in out of court amicable settlements. Reasons underneath are amongst others the need of IT suppliers to avoid damage of its reputation and the genuine interest of IT outsourcing clients to protect their interests and their business while the relationship is still ongoing.