Outsourcing—exit
Produced in partnership with Fieldfisher LLP
Outsourcing—exit

The following TMT practice note produced in partnership with Fieldfisher LLP provides comprehensive and up to date legal information covering:

  • Outsourcing—exit
  • Introduction
  • Allocation of risk and responsibilities
  • The exit plan
  • Emergency exit
  • Limitations to exit plans
  • Contract management and knowledge transfer
  • Supply chain management and third party contracts
  • Intellectual property and proprietary lock-in
  • Physical assets
  • More...

Introduction

Outsourcing involves a transfer of functions from a customer to a supplier and can lead the customer to lose detailed knowledge relating to the processes involved in delivering those services. The longer the term, the more likely it will be that the nature of the services and the methods of delivery will change. A customer may decide to transfer the services 'as is' to a replacement supplier or back in-house. Alternatively it may decide on a very different approach. When outsourcing arrangements end (for example, on breach, expiry or termination for convenience), exit arrangements must cover a number of eventualities.

Detailed exit provisions allow a customer to move the services from an existing supplier for practical, commercial and operational reasons. Equally importantly for regulated customers, they are essential to comply with regulatory risk management requirements, for example the requirements that apply to financial services outsourcing. See Practice Note: Financial services outsourcing—post MiFID II implementation and MiFID II—financial services outsourcing checklist.

Exit should not necessarily be seen as a process to be addressed only once termination is in prospect and many of the problems commonly encountered during exit, outlined below, can be addressed through careful day-to-day contract management.

The complexity of managing an exit should not be underestimated. Exit management can be a project in itself and the exit provisions in an agreement are one of

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