Eight Phases of Successful Outsourcing (Part 2 of 2)

By CIO-Office

We have identified eight phases of outsourcing methodology required for a successful outsource of services. Our eight phases are designed so that you can enter at any of the phases depending upon where you are in your outsourcing journey.

This article covers phases five to eight, with phases one to four covered in our previous article.

Phase 5 – Transition and Transform

When projects go wrong, our root cause analysis typically finds that the issues stem from the transition period, with poorly defined success criteria, overly optimistic project plans and a lack of experienced personnel to ensure a successful project delivery.

The period of transition to the new service delivery model is the most critical time. It is normal for people to relax at this stage, the contract has been signed, business case has been approved, business and cash benefits have been locked into plans and budgets and there is bonhomie with the new or renewed supplier.

This is precisely the time to put the foot hard on the accelerator with detailed transition and transformation plans, a dedicated transition super squad, containing experienced personnel from both the client and supplier side.

A key action at this stage is to agree the transition success criteria, with clear business focused outcomes and milestones to track progress. It is also extremely important that the roles and responsibilities for every individual and organisation are clear and communicated effectively to ensure all parties are fully aware of what they are required to do.

We recommend the development of a transition balanced scorecard, with regular executive governance to ensure the project focuses on the success criteria and key risks are managed before they become issues.

Phase 6 – Service Management

Establish the Key Service Principles and adopt a balanced scorecard approach to measure performance against the principles. This will help you objectively measure and report on the overall service performance and help ensure the service performance is aligned to your requirements, while enabling you to focus on the strategic issues for the services.

Regularly review your SLAs and KPIs, not just the performance against them, but also the measures themselves. Your business changes and what might be relevant in year one of a contract, may not reflect the business priorities in years 2 or 3. 

Pro-active capacity management and demand forecasting is essential for organisations to ensure service delivery performance is managed and scaled to meet critical business events. This also helps to ensure potential contract change notes and commercial impacts are understood and budgeted for in advance rather than retrospective.

Phase 7 – Optimise and Innovate

For significant operating model changes, it can typically take up to twelve months for the stabilisation of the service, during which time it is vital to keep a strong focus on maintaining essential business services, upskilling of the teams knowledge and driving adoption of standardised and industrialised processes wherever possible.

Once service delivery is stable and all the transition success criteria is met, now is the time to enact those transformation plans to drive continuous improvement. Transformation plans should be managed in the same way you would manage a project, with clear success criteria and return on investment agreed before commencement of the activity. 

CIO-OFFICE have four key factors we always include in our assessment:

  1. SPEED – How long will the transformation take, when does the activity need to mobilise and do you have the right people available?
  2. PRECISION – What are the required quality standards? What level of skills are required, and do you have access to them?
  3. COMPLEXITY – How difficult will it be to deliver? What is the risk to your business operations? 
  4. VALUE – What is the return on investment versus doing nothing or is there another way to realise the benefits?

Phase 8 – Renewal/Retender

As you start to look at your future requirements it is important to revisit the relationship drivers and independently assess the performance of your internal and external teams. This will provide you with an assessment identifying the strengths and opportunities to improve your existing arrangements.

You should also assess the associated risks of either renegotiating the current contract or retendering, this can help to assess the transition risks and preparedness of your organisation to successfully deliver either a renewal or new tender exercise to select your partner of choice.

Give yourself time, for any major contract renewal or retender we recommend you start at least 18 months before the contract end/renewal date. This will ensure the leverage during negotiations is firmly on your side, rather than trying to re-negotiate a deal when your supplier knows you have little to no time to enact change.

For more information on how we can help you, please contact us!

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