7 reasons IT services deals fail – and how to resolve disputes

When IT services deals break down, it can cause extraordinary pain for both the customer and service provider. Here's how to fix broken deals and mend the customer-supplier relationship.

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In the world of IT and telecom services, deals occasionally break down. When this happens, the customer-supplier relationship is sorely strained. Working through these challenges while also handling day-to-day vendor management is time consuming, often with negligible performance improvements, which only exacerbates customer dissatisfaction. This article highlights common causes of these failed relationships and discusses approaches and strategies that can help fix broken deals.

Why deals fail

While the root cause of failed IT service agreements is always context-specific, there are some usual suspects. Structuring your transaction and managing your provider to avoid these pitfalls substantially reduces the likelihood your deal will break down.

  1. Poor service delivery – The provider is either incapable of performing the scope of services or lacks the skills or resource capacity to meet the customer’s quality and performance requirements.
  2. Cost overruns – The provider performs the scope of services but its charges are far higher than the customer expected.
  3. False key assumptions – Both parties structure their deals based on a set of assumptions used to forecast service consumption and costs over the life of the contemplated transaction. If actual service delivery and consumption deviate considerably from the initial assumptions, either party or both parties may perceive the other is at fault or should bear a greater responsibility for the financial consequences of the mistake.
  4. Inattentive vendor management – Good contracts provide frameworks that help ensure the parties provide the deal the consideration they promised and put in place mechanisms for each party to promote compliance. But the customer must use these tools consistently, and sometimes aggressively, to preserve the benefits of its negotiated arrangement. After the honeymoon period that follows a successful implementation, customers may get lulled into neglecting their vendor oversight duties, which allows bad habits and practices to take root.

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