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Managing Service Provider Transitions: Time for a Change?

Outsourcing of infrastructure and operations typically involves the new service provider leading both the transition and transformation programme streams.  The client and the service provider bid team assume that the supplier has the right expertise, resources and experience to successfully complete these programmes.  The client’s procurement team also prefers to transfer the financial risk via the contract.  Having witnessed several transitions fail, often by landing a very poor service that takes months or years to reach a satisfactory maturity and leaving the supplier’s finances in ruin, I would like to challenge this conventional approach.  Isn’t it time we changed things?

Leave the IT transformation to the service provider whilst you – the client – manage the transition as part of a true partnership arrangement.  Here are three reasons why:

  1. It’s your partnership – Transferring all of the financial risk drives the wrong behaviour. It may make sense to procurement at contracting time but the result is all too often poor service to the business and financial pain. What use are service credits or delaying payments for missed milestones if business user satisfaction is plummeting? Establishing a successful partnership, possibly using vested sourcing principles, is much more important.  Leaving the service provider to manage the transition alone will result in missed opportunities for your delivery teams to be involved and build relationships.  Given most outsourcing organisations are now the service integrator – whether they are aware of this or not – it’s vital you share the risk of transitioning them into your corporate ecosystem.  Lead by example and establish the partnership from day one.
  2. You know your organisation best – Although service providers have lots of transition experience, they don’t know your organisation as intimately as you do. Promises that they will apply extensive knowledge and processes gained from all their previous engagements are well meaning but rarely materialise in the experience of the individuals on the job.  Generic processes and templates hinder rather than help and result in the important details of your situation being lost. Most transition projects run late and fail to deliver.  Allow your service delivery staff to help focus efforts, avoid suppliers tripping over known hurdles and assure when vital activities, like knowledge transfer, have been satisfactorily completed.
  3. It avoids the rush to get paid – Finally, this approach avoids one of the biggest traps of modern outsourcing – the service provider rushing to meet a transition payment milestone without having successfully transitioned the service. I continue to be amazed by the number of times a service commencement date is reached without a common understanding of basics like service reporting, SLAs, responsibility demarcations and what constitutes chargeable change. Avoid the temptation of rushing the last phases.

The root cause of these issues tend to lie within the procurement process where unrealistic expectations are set and this is where many of these troubles can be avoided – but fixing this is a topic for another day. Once the contract is signed and service providers focus on payment the likelihood is that they’ll lose sight of your best interests and cracks in your relationship will appear.  Making the customer responsible for this milestone rebalances this, shifts the emphasis on to quality of service and stops both parties having to declare a failure a success.

Managing transitions as a client-side business change results in a higher quality outcome and healthier relationship for both parties. After all, if the transition fails, what hope is there for the future?