The administration of Phones4U has raised many questions in the press and these questions are relevant to the cloud sector too. How is it possible to be part of a group that turned over more than £1 billion in 2013 and with profits of £105 milion and still fail? Has there been a concerted effort by the operators to bring a thriving business to its knees as the founder of Phones4U has suggested? What about his suggestion that the operators deliberately breached their contracts with Phones4U? What next for the 5,600 employees? Will Dixons Carphone be the real winner from this?

Much of this is speculation and, until the dust settles and the facts become clear, it is unhelpful to join in. However, it should serve as a reminder that profitable businesses can fail, even in a growing economy. If you’re a customer looking to buy cloud or if you’re a provide with various outsourced relationships there are lessons you can learn.

Here are 5 tips to help you maintain your suppliers and avoid a situation like this:

1. No matter how healthy your business, if all your suppliers desert you, your business will likely fail unless you can replace them quickly.
2. Stagger your termination and renewal dates with your suppliers so you have some control over timing.
3. If you want to guarantee that your supplier renews, you have to specify this in the contract. At least include a renewal window in the contract.
4. Exclude the right for your supplier to terminate at will so, unless you do something wrong, they can’t terminate before the end of agreed period without breaching the contract and this could allow you to claim compensation.
5. If you can’t save the business, close it down quickly so that you can still pay your creditors and staff.

Of course, if a cloud provider gets into financial difficulties – as 2e2 did – there’s also the issue of how to deal with the customer data it holds. See this earlier post for a tactic you might use as a cloud customer.

I’ll be talking about cloud contracting and supply issues at the workshop on 1 October. There are a couple of places left so book now if you want to attend.

A version of this post first featured on SME Rocket. Go visit the original for more insight to take your business forward – fast.

Image “Back Leather Cover Binder” courtesy of nuttakit at FreeDigitalPhotos.net