When Your AI Vendor Goes Belly Up
CIO, Thursday, October 29th, 2026
CIO advises IT leaders to plan for AI vendors failing or being acquired through data ownership, exit terms and fallback models.
CIO's Grant Gross urges IT leaders to plan for AI vendors shutting down or being acquired as hundreds of startups compete for enterprise spending.
The article notes Character.AI filed for bankruptcy in mid-October and agreed to sell some assets to Disney for $20 million, and cites SimpleClosure data showing AI companies close at a median age of 2.30 years versus 3.78 for others.
Experts advise owning AI data, ensuring prompts, outputs and fine-tuning data are exportable, and writing exit terms into contracts.
Others warn that switching vendors requires retesting workflows and that notice can be short, and recommend open-weight fallback models or more infrastructure ownership.