5. Governance Rollbacks. It's rare that vendor governance costs are separately called out in an outsourcing contract. "This makes governance an easy target for cost cutting," says Hansen of Baker & McKenzie. Cutbacks in management oversight are an early sign the vendor is backing out of the relationship. An increase in delivery or account team turnover, particularly among more senior members and with little advance notice, is also a bad sign. "While providers will always attempt to roll their best people off to reduce costs, keep them fresh, to pursue other business, providers looking to build and grow long term strategic relationships will do less of this," says KPMG's Lepeak
6. More Offshore. If allowed by the contract, a troubled IT outsourcing provider may replace onshore resources with lower-cost offshore staff, says Martin of Pace Harmon. In some cases, they may not even be required to notify the customer of the shift.
7. Dysfunction on the Ground. "When the operational people stop solving problems, and start finding constant fault with each other, this is a sure sign that something may be trickling down," says Hansen of Baker & McKenzie. "Once you start seeing the operational people showing problematic behavior, you may be going down a road that is very difficult to reverse, even if the management of both companies ultimately decides to continue working together." If the provider refuses to assign a new project executive, even when interactions with the current project executive have broken down, you've probably hit bottom.
"This happens because they can no longer find anyone who will take-on the challenge and because they really don't want to send the signal that they will bend over backwards to fix it," says Strichman of Sanda Partners. "I have personally seen a lead vendor executive driven to tears after months of client meetings, finally admitting that nothing could be done to get things back on track. The deal was terminated within six months."
8. Executive Lockout. If the last time you heard from the provider's top brass was at the contract signing, the relationship is on the rocks. "Good provider execs spend a lot of time in the field with the best, largest or highest priority accounts," says KPMG's Lepeak. "If a client isn't seeing the provider's execs, this could be a sign of lessening account interest or priority."
