Exit strategies for stratgic sourcing – Michael Herschel

For those that are devoted to strategic outsourcing such articles may be a taboo, similar to a marriage contract. Yet, in uncertain times, it is wise to anticipate when partnerships break up. Where is the fatal flaw? The flaw is that many consider a strategic partnership not as normal business relations, but as something more “cosy” and even as being of a higher moral quality. Let us therefore get started with how strategic partnerships come into being!
The questions at the start should be:
1. Why do I go for strategic outsourcing? Would tactical outsourcing do the job, with a limited number of preferred providers?
2. Have I had extensive experience with the chosen partners, over several studies, in much more than one area of outsourcing, and has this been very satisfying both at corporate and the affiliates?
3. Will I have one, two or more strategic partners? I suggest at least 4 as this reduces the workload that may have to be taken over or redistributed, to 25%.
4. Will I keep a certain level of functional outsourcing – with extra partners? If they are capable, this could reduce my dependency.
5. Will I have internal capacity that is not only able to supervise the strategic partner but also knows in detail the kind of work the strategic partner does?
6. For how many years will my initial contract run? I suggest between 3 and 6.
7. What percentage of my work will I outsource – on a trial and a number of patients basis?
8. How do I minimize vulnerability? What will happen if I have a major problem during a pivotal trial program?
9. Am I able to cancel the partnership and transition the work within a maximum of four weeks? If you are not you should not strategically outsource.
Let us hope that this list does not encourage you from strategic outsourcing. It does make sense provided you make the above precautions. Now you made your contracts, you executed them, until you found that this is not your optimal style of working, economically or else. Or the CRO partner ran into a major quality problem, pushed the fees or behaved in an unacceptable way. Or you did, and your partner got annoyed.
Let us assume the contract was correct, and you reserved your right for exits of some kind.
What need to be considered for an exit strategy?
1. Make sure there are no legal problems left.
2. Have an internal plan ready which can be made to purpose and is ready to be executed now.
3. For each activity have a plan how it can be transitioned to you or another vendor.
4. Form an internal “battle group” that oversees the transition, of the major areas that are concerned. Appoint a new project leader immediately, best the person who was the main contact if this is desirable.
5. Inform all stakeholders about the split and how you will go ahead. Make sure authorities, ethics committees, and investigators know early and do not fall into a panic.
6. Document all findings which could mean that the contract has not been honored in full.
7. Revise the budgets allowing a final bottom line with the previous business partner, and a new budget for the new ways of working. Make sure other vendors receive their payments in time.
8. Make a particular analysis of the patient protection issues and of data quality. Hope you included respective penalty payments in your contracts.
Finally ….
Finally let us hope you never need this advice. But as the old Romans said:
Si vis pacem, para bellum (if you want peace, be also prepared for war).

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