When Outsourcing Providers Disappear

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There is no denying the breadth and depth of the current global recession, leaving organizations to wonder how long they will have to tread water until the economic pressures begin to recede. As a result of these recessionary pressures, many organizations have made long-put-off decisions to outsource some—or all—of their speech technologies.

Overall, that is a healthy move for a large number of organizations with core competencies that do not include design and operation of speech technologies. However, many of the same pressures these businesses are experiencing are also making life difficult for some outsourcing providers.

During the past three years, financial crises among several outsourcing providers have quietly been overcome; according to signals inside the industry, at least one appears to have just barely survived. On another front, market changes coupled with recessionary pressures are casting doubts about one or two outsourcing providers' long-term strategies.

Regardless of the drivers behind each provider's situation, risk has increased—or is increasing—for clients. All business transactions come with risk, and hopefully that risk is correctly identified, assessed, and mitigated through mutually agreed-upon contractual terms and conditions. Traditionally, most outsourcing contracts focus on service-level agreements (SLAs) to essentially protect clients from outages, poor performance, and/or slow response to change requests.

Very few corporate decision makers who direct the choice of the outsourcing provider supply language to protect themselves from change of control through sale or shutdown of the provider's business, which are perceived failures of choosing a particular provider. Why? Who wants to enter into a multiyear outsourcing contract with failure on the forefront of their colleagues' and management's minds? It has been my experience that when this language does appear in a contract, it clearly came from a savvy legal team, experienced in outsourcing contracts.

Now is the best time for everyone currently in a speech technologies outsourcing arrangement to pull out their existing contract and review it for clauses pertaining to change of control. Highlight where you believe they may be, then engage your legal team to confirm or deny your protection. Even if you are delighted with your current outsourcing provider, you owe it to your organization to protect yourself from change of control. Yes, the acquiring organization will likely have to continue to acknowledge your current contract (another point to confirm with your legal team), but all of the best intentions do not mean much when layoffs start occurring in the team you have been working with. You may believe that SLAs will protect you through financial penalties, but SLAs provide the best protection in stable outsourcing situations. Change of control means changes in your outsourcing provider.

This column is not meant to replace your legal representation in any form; it should be regarded as advice to re-engage with your legal team, with change of control as the main topic. If there is any way to re-open your current contract to add the additional clauses, do so. If your outsourcing provider resists, make it very clear that the fact that they don't have the confidence to add change of control protection for you is of deep concern. And that you will make this a prime consideration when the contract is nearing the end of its life.

Points to consider for change of control (CoC) provisions should include:

  • Ability for you to terminate the contract any time short of the full contract duration upon CoC.
  • Notification time frame before any major change of staffing upon CoC (I recommend nine months minimum). You will require your legal team's savvy to cover this point to where your provider will be willing to accept it. If enough customers require this provision, it may hamper their efforts to sell off the business, so they will likely reject the clause if it is not worded properly.
  • Upon CoC, full compensation for expenses related to moving off of the provider's platform to another like platform, e.g., Genesys to Genesys, Avaya to Avaya, etc. Application change costs can be difficult to estimate; therefore, your provider unequivocally would reject this clause without a "like to like" stipulation.?

Kevin Brown is managing director at VoxPeritus, where he specializes in speech solutions consulting. He has 19 years of experience designing and delivering speech-enabled solutions in premise and hosted environments. He can be reached at kevin.brown@voxperitus.com, or follow him on Twitter @CustExperGuru.

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