Earlier this year, the 10-year, $1.6 billion information technology outsourcing agreement between Sears, Roebuck & Co. and Computer Science Corp (CSC) hit a major bump, resulting in talk of termination, federal court litigation and strained negotiations between the parties. But could the acrimony have been avoided?
Companies enter into outsourcing agreements for a variety of reasons, among which include: cost-savings, organizational efficiency and, perhaps most importantly, to better focus on the core objectives of their businesses. From a business point of view, once an agreement is signed, the two companies become intertwined. But as they evolve side-by-side, turnover in management can occur over time and a slight detachment in relations may develop where the vendor is hard-pressed to keep the customer happy and the customer may feel that the subtleties of its business culture are being ignored. Still other times, a long-term outsourcing agreement is ill-equipped to deal with changes in circumstances, such as mergers or expansion. In the end, mismatched expectations are perhaps the biggest cause of the negative spiral that sometimes ends in an outsourcing relationship failure.
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