6 Steps on how to terminate a contract with an outsource custom software development company
Updated: Sep 26
Many outsources focus on long-term partnership and that’s why they lock clients on themselves, but lose trust and ability to be referred. This sometimes helps to generate income longer, but most often leaves fields of unhappy clients with burned budgets behind. And destroy the reputation of the domain in general.
At Widerix we focus on leaving happy clients with value instead of keeping them with us as long as possible. This approach helps to get more referrals and higher reputation. Which results in higher business indicators for us.
This post is for business/budget owners who have doubts of working with an outsource or offshore custom software development services but need to do so because of cost effectiveness or other factors. Sometimes they plan to later move to other custom software development companies or create their own in-house teams or combine these approaches. Independently from the plans I want to share these 6 steps on how to terminate a contract with a software company without pain and with value.
1. Start preparing from the early beginning
Well, ideally you sign a contract with a trusted agency (always do so, this is safe for everybody). But business is business:
Add to contract about Post-Implementation Review (less chance to lose contact at all and ability to get help after migration).
Take attention related to contract termination statements. In any case - careful contract reading is important, so nothing else about it.
Another important moment at the beginning of collaboration with an outsource is to request and insist on getting full admin/owner access to source code, documentation and infrastructure. Later you’ll see why.
2. Build a good understanding about what is going on and how it works during collaboration
Trust is good, but documentation and understanding is better:
Ask questions, be involved and ensure that architectural diagrams, development processes, all tech debt and other specific moments are well documented.
Ensure that code is readable and contains comments.
Check that infrastructure is configured as code. No “we did it manually and without documentation” allowed.
Always have full access to backups and ensure that they are always actual.
Worth to mention that if your involvement slows down your team - calm down and together with the team decide how you can stay informed without being a bottleneck in the development process. And no micromanagement, please.
3. Provide feedback and let outsource chance for change
This step can be done earlier and ideally continuously. If something goes bad from your point of view - always provide feedback. Many outsources with great service and client focus will say thank you and adapt to your needs.
But it is better to prepare some formalized email and escalate to the outsource C-level. Do it before informing them that you plan to end collaboration. Let’s say - give them one last chance.
4. Do audit and fulfill missed information if needed
Look for a Senior engineer in your network or hire a freelancer for a short term processes review. Read more about it here - 4 options on how to audit outsource software development.
Remember full access? Grant it to the engineer to prevent any unneeded disappointments from the current outsourcing company when they see somebody asking for additional credentials.
Set goals for this engineer:
Validate that the current process can be reproduced without any problems.
Document what is missed to have it reproducible.
* In case you already have an engineer in-house or from another company - even better. This engineer will have better motivation to check it carefully.
Then pass missed moments to the outsource and insist on resolving them. No excuses allowed.
5. Build migration roadmap to prevent delays in your business
Transfers and migrations are not an easy process and nobody wants to have them influence your business indicators.
Be ready to adjust your go to market/financial and/or other plans.
A roadmap of migrating from the outsource to another one or in-house team. Involve somebody from the new team in the process.
Risks and how to mitigate them.
There are different terms of termination, but you need to use this period exactly for a transfer. Both old and new teams should work in parallel at least for 1-2 weeks to be sure that everything is covered and known to the new team. If there is some non critical scope - let your old team work on it for the last weeks while the new one will work on your backlog.
6. Take a breath out and Inform your current outsource
Do the following to pass this step:
If possible - explain why you did so and keep good relationships - nobody knows what will happen tomorrow.
Share prepared earlier roadmap. Make a common meeting to discuss and validate it.
Set a deadline and move forward while monitoring execution carefully and being involved.
Sometimes things go wrong. Sometimes conflicts happen. Sometimes your outsource realizes that you plan to stop cooperation and starts interfere you and playing weird games.
The main advice here: Stay strong and persistent. It is hard when you see that such a case ruins your product and plans. But you can change it. Start with terminating a contract with a software company that doesn't satisfy your needs.
How to terminate a contract with software company - final thoughts
It is always better to talk. I saw only a couple of very strange cases when an outsource was ready to lose a client just to stay right. So in many situations feedback and good collaboration are helpful.
For all other cases you have this guide and can safely start your journey with outsource custom software development and save your nerves and budget.