HP’s recent purchase of EDS changed the landscape for the Outsourcing market with another computer/printer manufacturer providing IT outsourcing services. Since EDS was one of the first companies in the outsourcing business, and a giant at that, it seems interesting that HP acquired EDS and now competes with the likes of IBM, BearingPoint, ACS, CSC, Accenture, and Tata. Is it a coincidence that so many outsourcing giants go by 3-4 letter initials? Unlikely, but all of the companies have to offer similar services to be competitive.

Outsourcing Agreements

One signal feature of every outsourcing agreement is that they will end. They are all for a finite period and three things will happen at the end of the agreement:

(1) the customer will take over the outsourced services;
(2) the customer will migrate to another outsourcing vendor; or
(3) the customer will sign a new agreement with the same vendor.

So unless the outsourcing vendor remains the same there is an absolute need for the outsourcing agreement to be completely explicit about what happens to software licenses (and related maintenance and support), how the customer data is returned or moved, and what services and costs will be incurred to help migrated the software and services at the end of the agreement.

What happens if the Outsourcing Agreements are Unclear?

A few years ago a client terminated an outsourcing agreement to consolidate its IT operations with a new parent company. After asking the outsourcing vendor for its data so it could move on the outsourcing vendor asked where the customer wanted the tractor trailer to deliver the customer’s printed data. When the customer said it needed electronic copies the old vendor put a multi-million price tag on the electronic data. The customer had no choice but to pay the outrageous fee to get its data, and then thousands of dollars in litigation to get the money back later (which it did ultimately).