“Nothing ever becomes clear till it is experienced” – John Keats
By Uday Tembulkar
Most customers who are troubled by major problems and diminishing returns from IT Outsourcing need to look back at the road they travelled to get here. On introspection, they will find that the Contract and the Transition were to put it subtly, far from ideal.
Getting to the contract stage in most Outsourcing deals today is very competitive. Partly because of procurement pressure and mostly due to competition, several unrealistic goals are agreed to. The client and vendor have just signed a multi-year contract and the relationship is in the honeymoon phase! The Transition phase begins.
The Transition phase is probably the most crucial and unfortunately the worst managed stage of an Outsourcing program.
It has become a sort of standard for vendors to promise a 8 to 12 week transition phase. This is normally not enough time for the vendor to grasp the nuances of complicated business processes. The users or functional experts who play a key role normally don’t have enough time from their day jobs and it is never easy to transfer years of tribal knowledge in weeks. Even if the intent is good, there isn’t a structured way to do the knowledge transfer. In most cases, the seeds of a bad transition are sown right here!
Since the Transition phase is such a crucial first step of an IT Outsourcing program, it needs to have a separate governance structure. I like the name Transition Management Office or TMO. It is also the term used in M&A situations. Like an M&A scenario, there must be a finite end date for a transition – changing which is either impossible or has a major cost impact and there needs to be a clear Day 1 & Day 2 plan (terms also borrowed from the M&A world). The TMO can work as a subset of the Outsourcing Management Office (OMO) but needs a larger functional/business process representation. The transition needs to track Critical Performance Indicators on short time windows (a week or less) and make sure all stakeholders are looking at the exact same data.
I have seen the planning phase being affected by the honeymoon hangover. Both client and vendor tend to plan (correction hope!) for the best case on most parameters. The good transitions create realistic plans and that does not also mean playing too safe and planning for the worst case scenario!
Risk planning is widely known but mostly not covered at a granular enough level or at the right time. Many of the risk areas need attention well before planning an outsourcing program. There needs to be a proper inventory/repository of software and documentation. This is a major variable in a vendor’s estimate and most often based on guesstimates or best effort.
A client I was involved with, did some smart “ring fencing” of their key people to make sure they had an incentive to stay and make the outsourcing program successful. They also evaluated business disruption to draw a line on what was acceptable.
The vendor’s resource plan is crucial. Last week I learnt of a case where the transition team was just that and did not continue on to the steady state. This is a recipe for disaster and naturally, one year down the road, the program is messed up! Based on the size and scope, some programs may consider separating the Incident & Service Management teams. The offshore ramp up is generally a huge risk and most programs are underserved (in numbers, quality or both). Invariably the knowledge transfer to the larger team offshore is not effective. As pressure piles up, a small number of people become critical to the team’s performance and the daily stress on these people is immense. Attrition follows and the program is driven towards a slippery slope. Uneven productivity across teams is a massive problem and the real issue is that it goes wildly out of synch with the initial estimation techniques used to size productivity.
Most clients must understand that moving to an outsourced and SLA based model is a huge risk because the frame of reference for their business users is not based on past data. People tend to relate to people rather than processes and so several clients report sharply lower satisfaction levels despite SLAs being within “acceptable” levels. This is because IT SLAs are generally not linked to business impact and not enough was done in by way of change management.
I advise clients to also subtly but surely create readiness for a reverse transition. Business needs change and in some cases, the outsourcing may reach a point of no return. Clients should have the ability to take over or simply the wherewithal to switch vendors.
So how should CIOs deal with the Transition challenge? I would urge them to evaluate their team and make sure there is enough real world outsourcing experience. While we all want our team to develop new skills, the stakes are too high and there is simply no substitute for the right advice, skill & experience.
“Experience is one thing you can’t get for nothing” – Oscar Wilde
Uday Tembulkar is Co Founder of Empacus which provides Outsourcing Management Services to customers who have invested in IT & BPO Outsourcing. Uday has over 28 years of experience in the global IT and Outsourcing arena.
Read more on Outsourcing