Exiting a complex project or outsourcing agreement? 4 steps to exit (and transition) success

By Allan Watton on

service transitionWhen looking to transition from one complex project or outsourcing agreement (including the supplier) to another, one of the key issues we find is that all too often organisations try to ‘fill in the gaps’ from what was being delivered before, rather than ‘rethink’ what business outcomes they are really trying to achieve.

So, in other words, most organisations understand what they don’t want, but are usually less specific in quantifying and articulating what new and/or fit for purpose business outcomes they do want to achieve.

Service transition and exit, time for a rethink…

When a complex project or outsourcing partnership is either coming to its natural or even a premature end, this is often a great opportunity to rethink the business outcomes and objectives your organisation needs to move to and enable. In this context, it makes sense to reassess both the needs of the services/relationship and how the outcomes could and should be delivered.

In the scenarios referred to in this article we are assuming that the supplier has been delivering its services for some time, which means that you will now have a vast amount of performance data that you did not have at the outset. This data should be analysed to determine what lessons you can learn from it to recognise the way the delivery environment has shifted over time, the strategies and actions that have worked or not worked and where the gaps are between where you are now, the business outcomes you want to get to and the timescale you anticipate.

We regularly come across the situation where organisations are uncertain of how to clarify and articulate ‘what good, but affordable looks like’ and instead look to maintain a status quo. In many cases, agreements are simply renewed or extended with existing service providers, suppliers or vendors and old agreements and service requirements (perhaps with a refresh) are overlaid on new service provider relationships.

In certain situations, you may be under such time and/or resourcing pressure that you have no alternative but to do this. However, we live in an era of fast-moving change – Brexit, Covid-19 and a war in Eastern Europe – alongside strengthening pressures on environmental and social change.

Any one or more of these may have significantly shifted the priorities of service users, the capacities of service providers, the costs of delivering the service and the long-term aspirations of everyone in the relationship. It has never been more important to reassess expectations to ensure that the right decisions are made to achieve outcomes correctly aligned with needs.

You can avoid simply ‘churning’ the old into new; you can drive much better outcomes and maximum value. contract terms with strategic supplier partnerThere aren’t any simple ways to do this, however. These are ‘hard miles’ that you have to tread. Better, faster and cheaper do not exist unless you invest upfront, in the right manner. Without appropriate investment, you can achieve faster and cheaper, but your service quality will fall off a cliff. Or you can achieve better, but with slower and much more restricted services that are more expensive. Appropriate investment is the prerequisite to achieve all three… within a sensible time frame.

Use this end-of-service opportunity to economise, improve and, through learning from the lessons of the past, enter into a far more productive relationship. This is an opportunity not to be missed.

Why change service providers in the first place?

There are a number of reasons why you may now be looking to change service providers:

    1. You have decided to bring responsibility for service provision back in-house
    2. You wish to outsource a service currently being provided by an in-house team
    3. More frugal options are now available
    4. Your agreement is nearing its natural end
    5. Your current relationship is experiencing challenges and despite trying your best to remediate the performance of the supplier, improvements are simply not being achieved
    6. Service recipient demands have changed since your current agreement was signed
    7. Environmental, political or technological changes necessitate a new approach.

Service provision transition can occur in both directions – when outsourcing for the first time, all relevant knowledge and processes need to be transferred from a client’s dedicated team to the outsourced provider. When bringing that responsibility back in-house, knowledge and appreciation of best practice processes must travel in the other direction.Agree the terms of your exit with your vendor

Many agreements form long-term relationships and over time a number of situations can arise that often significantly and adversely affect the ability of your outsourced provider to satisfy the needs of the recipients of the services provided. These include advances in technology and political change that create an environment where previously considered boundaries that shaped solutions are no longer appropriate. Therefore, either more efficient and cost-effective solutions become available or an entire rethink is required.

Just think about how rapidly mobile technology (both phone and laptop) has advanced (in hardware, software and national infrastructure) to become such a vital part of everyday working environment efficiencies. Alternatively, consider what would happen if a change of government meant more or less funding for particular public services. There are many such examples that you could think of which would mean agreements and solutions drawn up one, five or even ten years ago are no longer suited to needs.

Service recipient needs and demands change over time as do their expectations. Service provision often must adapt to this, and inflexible agreements and relationships will become increasingly out of step with real-world demands.

There are of course likely to be more reasons, but these are the most common in our experience.

For the purposes of this article, let’s assume that the background to your desire to change service providers is the natural expiration of your current agreement or a transition from in-house to outsourced provision (or the other way around), i.e. an amicable transition. For what to do if you are looking to transition away from a troubled relationship, you can find more information within this article.

How to ensure your contractual agreement keeps pace

When you decide to move providers or bring service provision back in-house (or outsource a service you’ve been managing in-house until now), it is important to ensure that the new agreement you draw up is fit for purpose to deliver the business outcomes everyone expects from it.Recover your IT Implementation with strategic supplier

Assuming that you have chosen to reconsider the needs of the project with the transition to a new service provider, this will require a thorough analysis of the skills, knowledge and processes employed by those who are currently providing the service. It will also mean involving all key stakeholders in a knowledge gathering stage and giving yourself enough time to check and double-check that, going forward, lessons from the past have been learned, adequate resources have been allocated, and the right management talent is in place to get the best from those responsible to them. But it also means that your new agreement should be designed from the outset to align with ongoing business change.

Experience tells us that change is happening all of the time. And whether it’s external forces such as competition and technological advances, or internal forces such as gaining a greater appreciation for a service provider’s capabilities, the reality of change necessitates that adaptability needs to be built into your relationship and the contract that binds you.

After nearly a couple of decades working with hundreds of public and private sector clients on their major complex service delivery relationships, we know from our own hard-won experience that contracts should not be considered to be fixed points in time and space. They should be allowed to evolveto reshape and change, in order that they can best guide all parties to work together to achieve the best outcomes.

Contracts should be reviewed against ‘current’ business outcomes at least twice a year to determine their suitability, reshaping them where necessary. This structured evolution of your working relationship based on a mutual understanding that ‘things change’ will allow you to define and realign what good looks like. It also maintains an open dialogue between all parties to encourage innovation and new working practices while minimising the chances of relationship strain and misunderstandings.

4 key steps to service transition (and exit) success

When changing your service provider there are four key considerations to address, each of which are as important as the next to the success of your future service provision.

    1. Thoroughly determine the requirements/complexities of the service or project

How good is your understanding of the business outcomes you want to achieve? Are they (within reason), fully articulated and quantified? In turn, do you have clarity about the operational aspects of the service you are looking to transfer to another provider to achieve those outcomes?

To fully understand the intricate workings of all outsourced services or complex projects, when that service/project is transferred to another provider, it is imperative that you undertake a thorough review of how it is currently provided, monitored and maintained. Then, document it in the form of process maps and use cases to aid clarity in interpretation and avoid internal or external misunderstandings.

It is essential to analyse both how effective the current process and procedures have been, and how they can be improved in any new agreement to increase standards and reduce costs. This can only be achieved through open dialogue between all relevant parties and the maintenance of the right talent with adequate forethought and appreciation for the workings of the business in order to know what’s best now and into the future of the service provision. This is required to not only give all parties clarity of vision, but also to provide the insight needed to facilitate innovation which may result in added value being achieved.

Once you have handed responsibility over to your new service provider it’s important that oversight is retained in an appropriate manner. Organisations have been known to outsource too much of their own technical expertise, some of which should have been retained as part of an intelligent client function (ICF). Instead, they rely too heavily on their outsourced service providers to operate without appropriate critical-friend challenge. While it isn’t the client’s (or service users) role to tell the provider ‘how’ to run its services, allowing their own in-house expertise to dwindle to a point where effective management of the outsourced service becomes highly diluted and less effective, does not provide good value.

We would always recommend a client maintains an appropriate level of knowledge and expertise in-house, in the form of an adequately resourced ICF team.

    1. Strong governance wins the day

Management of all of the pieces on your particular transition chessboard is paramount to the success of any handover. It is important to foster the right sort of amicable relationships with outgoing providers so that they willingly impart knowledge that may have taken them years to amass and processes that may have taken them much experimentation to perfect. If you can encourage a collaborative environment, then your new team can hit the ground running and keep disruption during the transition to a minimum. This requires the right client-side team, a clear hierarchy, and a strong commitment to open communication.

    1. Assess the resourcing demands of the transition

Forward planning plays a large part in the success or failure of a service transfer to a new provider. Ensuring that assets, in the form of manpower, skills, knowledge and technology, that may be lost in the transition, are amply resourced, gathered and understood at the new provider’s end by the time the transition takes place is important. Issues such as TUPE and software licensing are two areas where complexities may cause significant issues in the transition. The knock-on effect of a lost resource can be unpredictable; therefore, much analysis will be required as well as the time it will take to carry it out. Asset resourcing must start well in advance of the transfer date, and to appreciate the human resourcing and legal implications of such a move appropriate client-side talent must be installed.

    1. Monitor, review, repeat

Knowing and being able to quantify ‘what good looks like’, understanding both the likely strains of transition and the resources required to ensure the new team has the best chance of success, provides a template for everyone to follow. But it’s good management that ensures everyone knows what role they play in the success of the transfer and post-transfer service delivery, and creates an environment for encouraging the right behaviours that will see the transition through, and the relationship to new productivity heights.

This ‘right environment’ means the setting of clear KPIs, the creation of unambiguous contractual agreements with built-in mechanisms to ensure regular realignment to your business outcomes, and the monitoring of progress against set targets and goals. Your relationship with your new provider will require nurturing and your contractual agreement will need to be allowed to evolve in order for you to maximise opportunities and achieve the best value.

When considering changing service providers, take your time, do it right – this will be your opportunity to get to ‘what good looks like’, not just fix the mistakes of the past. You now have a key opportunity to either completely reshape, or just enhance and improve, to tweak and optimise, in order to get the most from your relationships and the service your new provider provides. Thoroughly analyse what has been done, learn from what you have done well – not just where challenges have existed. Then assess what could be done, implement what needs to be done, and involve everyone in the process. Good luck.

Want to know more about BPG’s Exit and Transition Services? Click here.