Four and a Half Hazards in Outsourcing Transitions

hazard, transition. There’s no shortage of methodologies and advisories on best practices and risk mitigation strategies for the transition phase of outsourcing relationships. Even so, many buyers encounter situations they didn’t foresee when structuring their arrangement, which cause costs to rise and delay time to value. Here are four and a half hazards you need to watch out for:

 

 

1. What you don’t know will cost you

Anything from technology issues to human behavior to lack of knowledge as well as operational structures that were too tight or too loose can prove costly in the long run. What your company doesn’t know at the outset of the outsourcing relationship, can and most likely will end up costing you a lot of money and time. In a business where time is of the essence this can prove to be very dangerous and will ultimately lead to a change in the outsourcing arrangement.

2. Technology connectivity

Trouble can arise with the provider’s ability to establish timely connectivity to all of its customers’ necessary systems because they’re not aware of the various groups and business processes that governed connectivity. Remedying this situation involves forming a dedicated connectivity team with both business and network members. The team can then build relationships within the customer’s technology group, allowing them to understand the ownership and flow of information and also to help work through the issues more quickly.

3. Aggressive go-live date

Extending the original planned go-live date can be challenging and can be due to a myriad of issues. In these cases, an aggressive ramp-up is necessary to achieve the desired time-to-value. Buyers also have to spend time with their management teams and other stakeholders to lessen the potential negative impression and increased costs from having to extend the go-live date.

4. Service level agreements

Problematic service level measurements will lead to a contract renegotiation. A bad service level agreement leaves a lot of wiggle room where you might not need it. Or it can be inflexible in the areas you need it most. A good arrangement now measures the appropriate percentage of flexibility.

The final ½ item is the total cost of ownership. This item only gets half a point as it is part of the deal. Additional cost are more likely to occur than to not. However, an effective pricing arrangement should ensure cost transparency.

 

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