Transition phase in outsourcing

One of the most risky phases in the outsourcing lifecycle is transition phase. During the transition phase of outsourcing various types of risk are generated. These include financial risks (i.e. creation of additional costs because of the disruption of normal service delivery), regulatory risks (i.e. risks of not operating in compliance with wider regulatory standards, for example ISO), and operational risks (i.e. risks that present obstacles to the execution of operations). One of the most important operational risks associated with the transition phase is the transfer of knowledge.

NeoIT (2005) suggested the following steps for dealing with communication challenges during the transition phase of global sourcing initiatives:

1.       Selecting the right communication vehicles

2.       Developing key internal messages

a.       Resist communication that says nothing

b.      It is better not to persuade

c.       Painting a positive story does not always help

3.       Choose the right frequency of communication

4.       Be aware of the right senders and receivers

5.       External communications (To avoid negative publicity)

IGate (2004) went a step further and suggested a more wide-ranging set of risk management strategies:

1.       Put key contract terms into practice

2.       Use scenario-based predictive modeling to identify and mitigate risk

3.       Use monitoring and testing to detect unaddressed risks early

4.       Make the plan fit people transition, not vice versa

5.       Build-in flexibility to the system to address common risks

6.       Have a broad plan to address potential contingencies

The transition phase, which is the starting point of most outsourcing relationships, requires special attention. Failing to properly design and execute the transition phase will very likely result in additional challenges for both client and vendor as the relationship matures.

Reference

IGate Report (2004), “Six imperatives for the transition phase of an out-sourcing engagement,”http://www.igate.com/insights/white_papers/6-imperatives.pdf. Last accessed 2.17.2009.

NeoIT (April, 2005 )”Best Practices in Communicating Global Outsourcing Initiatives”, Internal Report by NeoIT, http://www.neoit.com/pdfs/whitepapers/OIv3i04_0405_Best-Practices-Communication.pdf. Last accessed: 6. 11. 2009