Outsourcing agreements almost always include preparation for disaster recovery based upon common delivery failures caused by outages, major workload spikes, and force majeure situations. There is even coverage in case the provider becomes financial instability or the client begins to believe it is in their best interest to transition to a new provider or bring the function back in house.

So what if you, as the CFO or CIO of a major corporation, woke up one morning to discover Provider Delivery Armageddon? Overnight, your outsourcing provider has completely ceased operations, and 70% to 90% of the provider workforce supporting your company is based offshore. How would you respond? What would you do first? How could you have been prepared; and how could this have been prevented?  This scenario has never actually occurred, but that being said, a senario like Enron had also never occured - until it did.

Some people might say the answer is simply not to source to an outside provider to begin with. But that is not true, the benefits of sourcing greatly override the odds of Provider Delivery Armageddon.  What you do first starts with what you do today.

If you are currently sourcing operations:
• Examine your provider’s financial and operational environment continuously.
• Perform annual site visits performing the same due diligence steps as in the original provider selection process.
• Monitor provider performance closely and follow up on continual operational abnormalities.
• Keep current with the industry communications and standards; and with other providers.
• Develop your own disaster recovery plan as if ‘Armageddon’ took place and practice execution.

If you are going to source operations:
• Do not jump at low price without the proper due diligence.  You may be entering into a relationship where your deal could be the last one the provider you selected ever does.  If it is too good to be true, it probably is.
• Do more due diligence than just the site visits.  Know intimately whom you are entrusting your business operations.
• Make sure in the agreement or relationship the company which you are doing business with is subject to random validation.
• Follow the same steps as mentioned above in if you are currently sourcing operations.

Share some of your experiences and ideas how you would handle it for your company if Provider Delivery Armageddon occurred, in the comments area.