Transition Challenges

The transition period is critical to the success of the overall outsourcing relationship. In our experience with outsourcing remediation, at least two-thirds of the cases we encounter can be traced to problems at the transfer or transition stage. Some high-profile outsourcing divorces — such as Sears's 2005 termination of a $US1.6 billion IT outsourcing deal with Computer Sciences Corporation less than a year after signing the contract — suggests that the relationship went sour even before transition could take place.

What kinds of problems can affect an IT outsourcing deal at the transition stage? Often, buyers who are attentive to service issues in the run phase of a relationship may be less attentive to issues in transition. So there may be no mechanisms in place even to identify problems, much less to drive corrective action. This means some deals can end up in a kind of a failure loop right at the outset, with no means in place to correct problems.

Another reason for early-stage failure is that transition management involves specialized skills and experience. Currently, there are far more outsourcing deals in the marketplace than there are people experienced enough to perform effective transition management.

Transition is also a time when loyalties are changing as personnel move from the buyer to the service provider. Regardless of who is signing the paycheque of key personnel, an outsourcing buyer will want to watch carefully that everyone remains focused on serving their best interests. We worked with a manufacturing company recently where the application development and maintenance lead on the buyer's side began to transition into a similar role on the service provider's side. Up until that point, the client had been appropriately focused on negotiating the mechanisms for scaling and managing workflow from the client to the service provider, including SLAs and targets. But as soon as the client lead began to transition, those issues suddenly became less important than considerations of who would be filling what roles for the provider. By surfacing this issue, we were able to help the buyer refocus the service provider team, improving the performance commitment and the pricing metrics.

Here are some factors to consider in anticipating and fixing issues at the transition stage.