Outsourcing data processing: planning for the disentanglement.

Abstract

Outsourcing data processing operations may be considered a conventional acquisition transaction between a customer and supplier. The most distinctive feature of a DP outsourcing contract is that it involves complex issues relating to computer software and technology and, frequently, intense issues relating to employees. But, one must do more in order to provide for preservation of the integrity (and, therefore, the value) of the data center. The contract must include not just the sale of a facility to a supplier who will take over the operations, but also terms for reconveying the facility at a future date. Getting out of the arrangement can be very complex. Disentanglement can be made less complex however, if the customer and the supplier negotiate all or part of the disentanglement procedures during the original contract proposal. Know ahead of time the possible scenarios for when disentanglement may take place and know what to do during the contract negotiations and during the length of the agreement to keep track of each other's properties. Know also the risks involved in outsourcing DP operations, such as what happens when the supplier's business fails. Having the supplier set up a separate profit entity for your contracted business or using a lien on the data center properties may help avoid loss if such failure occurs.