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Transition - Six Factors Determining Success or Failure

Transition - Six Factors Determining Success or Failure

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Published by cgayner
How to avoid the complexities which can spell disaster for your outsourcing process
How to avoid the complexities which can spell disaster for your outsourcing process

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Published by: cgayner on Sep 10, 2008
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11/15/2012

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Transition: Six Factors Determining Success or Failure
How to avoid the complexities which can spell disaster for your outsourcingprocess
By: Tim CumminsExecutive DirectorIACCM
(
Issue Details:
June 2008).In the world of outsourcing and managed services, the term ‘transition’ hasbecome associated with complexity. It is viewed as a distinct phase in thecustomer – provider relationship – and a phase where things often go wrong.Why has it earned that reputation and how might it be improved? Transition occurs immediately after contract signature and before services go fullylive. Depending on the nature of the service, it may involve tough and painfulactions – for example, the reallocation or elimination of resources, transfer of work and introduction of new technologies and procedures. As with all majorchange programmes, there will be resistance and potential for discord. But theseissues could be overcome. Unfortunately, there are other factors – all avoidable –that make such transitions especially painful and prone to failure. This article,based on extensive IACCM research, will explore six of those factors and waysthey can be avoided. 
Leadership
 The number one issue identified by customer teams is the lack of consistent andqualified leadership . Executives frequently underestimate the impact andimplications of outsourcing or managed services contracts. They fail to appreciatethe politics, the emotions and the tough decisions that must be made. Theirteams are frequently led by people without the right leadership qualities (they aremanagers, not leaders) or by executives who simply cannot allocate enough timeand oversight. In the opinion of experienced teams, this is the number oneweakness in both the pre-award and post-award phase. They need someone whounderstands and can influence strategy, who is able to create and maintain thevision and goals of the initiative and who has rapid access to senior executiveswhen required. All too often, they get a senior functional manager whounderstands the existing operations and probably has a sense of the servicesrequired – but is emotionally attached to the old ways, the old people and oldrelationships. 
Transfer of responsibility
 Weaknesses in the transition team are a frequent source of problems . Researchshows that neither side is good at maintaining continuity between the 'deal team'and the 'delivery team'. This is especially true of providers. Very often thetransition/delivery personnel are introduced only in the very final stages of thedeal set-up. 'Best practice' companies try to ensure that key personnel are
 
involved for at least 6 weeks prior to contract signature. Without this, they arenot familiar with the negotiations, they may disagree with some of thecommitments made, and have had no chance to influence outcomes. Dependingon the quality of the records, they may find themselves effectively renegotiatinglarge parts of the deal, or spending time on clarification of requirements, goalsand commitments. Why does this happen? One key reason is that many customers are driving such ahard bargain on price that it is simply unaffordable for the vendor to commitresources before the deal is won. This is a classic example of the price-versus-value debate; and in this instance, both sides lose out. 
Unclear or contradictory goals and/or requirements
 Many customers are very confused about their goals. They specify that they wantone thing (e.g. increased value, innovation), but negotiate another (e.g. costreduction). Some 25% of customers recognise this weakness; nearly 50% of providers feel it to be the case. Without consensus in the customer organisation,it is obviously very hard for the provider to plan or resource effectively. Researchshows that outsourcing typically does deliver cost benefits - but frequentlydisappoints customers longer-term because of failures in quality, added value orinnovation. Glance at the typical measurements or governance system put inplace by the transition team and you will find many deals focus on the wrongthings. 
Negotiation focuses on wrong topics
Outsourcing and managed services are in many cases strategic relationships.Treating them as commodities means that the customer must accept far moreresponsibility for outcomes (yes, you do get what you pay for). Many negotiationsare soured by confrontations over pricing and risk . This can be especially truewhen third parties are involved and not given clear direction - or even worse, aredirected to terrorise the provider. Good negotiations will have focused on clearrequirements and a robust on-going governance system, rather than gettingbogged down by debates over liquidated damages, liabilities and indemnities.Adversarial negotiations sour the relationship and frequently fail to create arelationship framework. This results in a revenge / recovery environment, whereneither side trusts the other and each is unwilling to impart information or showflexibility. If you spend too much time planning for failure, guess what you get? 
Insufficient focus on cultural compatibility
Given the weaknesses outlined above, it is perhaps no surprise that manyrelationships have not adequately considered the extent to which theorganisations are compatible. Do they share similar values and culture? Do theyhave the necessary complementary skills? Do they have a record of investing inrelationships (or do they prefer an environment of blame and dispute)? Too often,the transition teams are the ones to discover that there really is no goodrelationship fit - and they are then left trying to meld incompatible organisations.

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