Planning For Outsourcing’s Exit

As the average duration of outsourcing contracts continues to become shorter, the issue of exit grows in importance. By tradition, best practice in negotiating exit terms has been: plan it early, and work hard to make it uncontroversial.

Sometimes, a case comes along and helps to remind us why a pre-contract focus on exit is important. A recent UK case, AstraZeneca v IBM, reinforces the importance of addressing the termination and exit provisions of an IT services agreement at the time of signing, rather than when the time has come to exit that agreement.

BACKGROUND

The case arose out of a July 2007 Master Services Agreement (MSA) between IBM and global biopharmaceuticals company AstraZeneca for the provision of IT services. AstraZeneca terminated the MSA in April 2011, triggering (so AstraZeneca thought) various exit provisions, including an exit plan to bring the services back in-house or to transfer them to another provider. This gave rise to a dispute