G 0.11 Failure or disruption of service providers

Hardly any institution works today without outsourcing providers, service or supply companies. If organizational units depend on service companies, disruptions to external services can impair task execution. Partial or complete failure of outsourcing service providers or supply companies can significantly impact business continuity, especially for critical business processes. There are various causes for such failures, for example insolvency, unilateral termination of the contract by the service or supply company, operational problems such as natural disasters or staff shortages. Problems can also arise when the services provided by service companies do not meet the quality requirements of the clients.

It should also be noted that service companies often use subcontractors to provide their services to clients. Disruptions, quality defects and failures on the part of subcontractors can indirectly lead to impairment of the clients.

Business processes of clients can also be impaired by failures of IT systems at service providers or communication connections to them.

The potentially necessary repatriation of outsourced processes can be severely hampered, for example because the outsourced processes are not sufficiently documented or because the previous service providers do not support the repatriation.

Examples:

• A company installed its servers in a data center of an external service provider. After a fire in this data center, the company’s finance department was unable to function. This resulted in substantial financial losses for the company.
• A company’s just-in-time production was dependent on the supply of operating resources from external service providers. After a truck broke down at the service provider, the delivery of urgently needed parts was severely delayed. A large portion of customers could not be supplied within the agreed timeframe.
• A bank handled all cash transports with a cash-in-transit company. The cash-in-transit company unexpectedly filed for bankruptcy. The agreement and route planning with a new cash-in-transit company took several days. As a result, there were significant problems and delays in cash supply and disposal at the bank’s branches.