A couple of weeks ago we covered Four and a Half Hazards in Outsourcing Transitions and decided to add five more hazards that you need to avoid while structuring your arrangement. Being unaware of theses hazards can prove not only costly but time-consuming as well. Here are four five more hazards you need to watch out for:
1. Software licensing
Unexpected software licensing costs during the transition phase can hit a company outsourcing several IT components. Added-cost issues are usually due to a lack of communication. In some cases, buyers will assume the costs rather than communicating with the provider to determine if its assumption was correct. In other cases, the provider’s communication to the buyer is inaccurate because of ineffective communication among the different divisions of the provider’s business. The solution is simple: talk, or assumptions will be made—costly assumptions.
2. Managing the relationship
There’s a clear difference between working with an outsourcer and working with a team of people who are subordinate to you. If you don’t understand that change upfront, you have to learn it. And as we all know learning something new takes time and the relationship will struggle if there’s a delayed time to value. Entering an outsourcing relationship with the wrong mindset will incur you extra costs.
3. Learning curve
Don’t underestimate the learning curve. Often, buyers find that the learning curve was more difficult and took longer than they had anticipated. In some cases, the learning curve is for the provider’s team to learn the buyer’s business and its IT systems. In other cases, it is for the buyer’s end-users to learn new systems and procedures. In both cases, the provider and the buyer had to step in and help the other by making sure they operated the processes and technology correctly and fixed the errors. Both the buyer and the provider will lose money because the time-to-value is extended.
4. Offshore readiness
It’s not uncommon for buyers and providers to find out—when in the midst of the transition phase—that a specific component of an entire process scope is not ready for offshoring or, in some cases, is prohibited from being sent offshore. Don’t let this happen to you, cross all your t’s and dot all your i’s.
5. Communication around quality
The transition phase of an outsourcing relationship often erupts in “noise” from the customer’s end-users around dissatisfaction with the quality of services. Often, the analysis finds that the source of the problem is the buyer’s lack of effective communication around quality expectations and needs. At other times, the buyer has no one in-house with the in-depth knowledge to effectively oversee the quality of the provider’s work. There are also cases where the buyer begins the relationship with a light approach to governance and more of an ad hoc style of communication, which can lead to ineffective communication around specific needs and expectations.
Heeding these insights will help avoid unbudgeted costs and delayed time to value.