T 0.11 Failure or Disruption of Service Providers

Hardly any institution today operates without service providers like subcontractors or outsourcing providers. If organisational units are dependent on service providers, their performance can be impaired due to the absence of external services. A partial or complete outage of an outsourcing service provider or a subcontractor can have a considerable effect on operational continuity, particularly in the case of critical business processes. There are different reasons for such outages, for example insolvency, unilateral termination of contract by the service provider or subcontractor, operational problems due to forces of nature or shortfall of personnel for example. Problems can also arise if the services rendered by the service provider do not correspond to the quality requirements of the contractor.

In addition, it has to be taken into account that service providers also frequently resort to subcontractors to make their services available to the contractor. Disruptions, quality defects and failures on the part of the subcontractors can thus indirectly lead to impairments in relation to the contractor.

The contractor's business processes can also be impaired by failures of the service provider's IT systems or communication connections.

Ceasing to outsource service processes, if it proves necessary, can be considerably complicated, because the outsourced procedures are not adequately documented or because the former service provider does not support this realignment, for instance.

Examples:

• A company has installed its servers in a computing centre of an external service provider. After a fire in this computing centre, the finance department of the company was no longer capable of working. It resulted in considerable financial losses for the company.
• The just-in-time production of a company's products was dependent on the subcontracted supply of material from external service providers. After a provider's lorry failed due to a defect, the delivery of parts urgently required was drastically delayed. This way, a number of customers could not receive their deliveries, timely.
• A banking institute handled all monetary transports using a cash-in-transit company. The latter company surprisingly declared itself bankrupt. The agreement and route planning with a new valuables carrier took several days. This led to considerable problems and time delays in cash supply to and collections from the affected branches of the bank.