Leadership

Naked CIO: No escaping the importance of exit strategies

Whether the contract is for outsourcing or hosting, you need a viable get out clause...

Even people who go over services contracts with a fine-toothed comb often overlook the blindingly obvious - the absence of an exit clause, says the Naked CIO.

Whenever I enter a building, I see signs pointing to the exits. In most workplaces there is an evacuation plan for emergencies. On most boats you will find rafts or life preservers, should you need to abandon ship. In short, most places we visit and most things we do offer some safety net or exit strategy.

So when I review the contracts I have inherited for managed services, hosting, co-location, software as a service and outsourcing - as I seem to be doing a lot lately - I am frustrated at the absence of provisions for exiting any of these relationships. Yet no relationship lasts forever.

This deficiency is widespread. I would even go as far as saying the lack of exit strategies with these types of contracts is systemic in IT departments.

Vendors love the absence of exit conditions because this situation allows them to have free rein over costs and no accountability for the value of the service they provide over time. They have a captive audience and that is exactly the position they try to exploit.

To be fair, it is not their fault even if they share some of the blame.

exit sign

Where's your exit strategy?
Photo credit: Markhillary via Flickr under the following Creative Commons licence

Exit conditions should be a mandatory feature of regulatory compliance - and this view comes from someone who hates compliance and hates government meddling in technology operations. But UK IT departments are suffering from being imprisoned by agreements and services that have no get-out clauses.

They are powerless to do anything about this problem because of staggering termination fees, lack of operational visibility, and critical and - in some cases permanent - dependencies that require the vendor services in perpetuity.

For CIOs and those responsible for managing such relationships, it is essential that you not only negotiate the best service but also that you consider exit conditions and requirements before you commit. Do it not only for your company but also for your successor because, if they are anything like me, they will detest walking into an environment only to find themselves straitjacketed by unresponsive managed-service agreements that fail to drive business value.

Not only do properly thought-out exit strategies help determine future strategy but they also send a key message to your vendor that service delivery and value will be important measures in fostering a long-term partnership. They also convey to your executive the additional risk that is created when you choose to engage others to manage aspects of your operations.

It is unrealistic to presume that a partnership with a vendor will be forever, so why do we structure contracts and agreements on that very premise. As part of your service contract, I would even encourage you to require the vendor to propose and even fund the exit as part of your services arrangement.

Money talks, so obliging vendors to move you to another provider or alternate structure would get their attention and reduce potential road blocks that they might put in place to discourage the termination of services.

Think about this. You are on the 10th floor of a burning building and there is no exit sign to guide you to safety. Why would you ever put your company in the same position?

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