Outsourcing - agreement dissolvement
From CEOpedia | Management online
| Outsourcing - agreement dissolvement |
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It follows the decision concerning the lack of opportunities for further cooperation with service provider, resulting usually from the conflict or from the inability to adapt to the requirements of the company. Arrangements for the circumstances of the break of cooperation, especially unilaterally, before the expiry of the agreed period should also be reflected in the form of the relevant provisions in the agreement. Managers must also provide a detailed description of the proceedings during the finishing of the cooperation and the implementation of the termination processes by the service provider.
- Financial loss: The dissolution of an outsourcing agreement can result in financial loss for the company, such as the cost of finding and transitioning to a new supplier, or the cost of completing unfinished work.
- Service disruption: Dissolving an outsourcing agreement may disrupt the continuity of services provided to customers, leading to negative consequences for the company's reputation and customer satisfaction.
- Legal disputes: The dissolution of an outsourcing agreement may lead to legal disputes, such as disputes over contract termination, intellectual property rights, and liability for damages.
- Loss of expertise and knowledge: When an outsourcing agreement is dissolved, the company may lose access to the expertise and knowledge of the supplier, which can be costly and time-consuming to replace.
- Difficulty in finding a replacement supplier: Finding a new supplier that can provide the same level of service and expertise as the previous supplier can be difficult, especially if the company has a specialized need.
- Data security and Privacy concerns: In case of dissolution of outsourcing agreement, company may face issues in terms of data security and privacy as the data may be in possession of the previous supplier and may not be able to retrieve it.
- Dependence on single supplier: When a company relies heavily on a single supplier, dissolution of an outsourcing agreement may leave the company without a viable alternative and make it vulnerable to market fluctuations and supply chain disruptions.
References
- Grossman, G. M., & Helpman, E. (2005). Outsourcing in a global economy. The Review of Economic Studies, 72(1), 135-159.
