Managing Outsource Transitions

TRANSITION MANAGEMENT
 Is the set of activities that transpire after a BPO contract is signed that implements or
executes the detailed movement or transfer of process form the client to the service
provider. It is the process of migrating knowledge, systems, and operating capabilities
between an outsourcing environment to an in-house staff or vice versa.
Transition management is one of the most important roles in any organization that performs
outsourcing or off-shoring.
Three Ultimate Goals:
1. Ensure a smooth transfer of responsibility
2. Handle the people side of the transition in such a way that the employees are treated fairly
and with respect.
3. Design the jobs to optimize working efficiency.
THE MANAGER
 A transition manager is responsible for migrating the function or the process from the client
location or organization to the service provider or outsourcing organization.

Besides managing the day to day affairs of a migration, transition management is also about change
management. A transition manager is the face of outsourcing to many people. To be successful,
the manager needs to facilitate the changes that outsourcing brings about. They need to ensure that
the migrations are done in an effective manner. Also need to demonstrate the transformational
power of outsourcing.

The Transition Manager needs to be an effective communicator as the role requires extensive
interaction with the clients.
Because of the nature of the role, a Transition Manager needs to have a variety of skills and
competencies:
 Needs to have strong project management skills, as the migration process are
complex projects that require expert management skills;
 Needs to be comfortable in working in a cross- cultural environment, as most often
the client teams are based overseas;
 Needs to have a thorough understanding of the existing business and legal
processes, and current as well as emerging technologies as these play a critical role
in the off-shoring of a business function.
TRANSITION STRATEGIES & KNOWLEDGE TRANSFER FRAMEWORK
LIFT AND SHIFT
 This is the most common methodology used. When the process is mature, the Lift and Shift
approach is used for migrating.
Phases
1. Move the current process to the service provider without changes/ improvements.
2. Stabilize
3. Re-engineer the process to achieve efficiency gain – produce same output, less FTEs
- Modify the process
- Add end-user type or strategic automation
- Combine role with others
- Move process into a production line
- Negotiate elimination of unnecessary outputs
ADVANTAGES- advantages of an “as is” basis process migration:
- Training the new team is easier, as the process is well understood and documented
- Existing employees at the donor location are available to support the process in case of
disruptions or instability
- A fresh set of eyes (the new team) look at the process from a fresh perspective, often
resulting in process improvements and enhanced controls.
RE-ENGINEER AND MIGRATE
Fundamental rethinking and radically redesigning of the business process so as achieve dramatic
improvements in critical measures of performance such as cost, service, and speed.
Items to consider:
- Useful when the process is either broken and requires fixing, or is due to undergo
significant change in the near future (systems change or process change)
- In such cases, it may be important to utilize the expertise of the existing team (which
is built over several years) to drive the change, before it is handed to the new team.

TRANSITION PITFALLS AND RISKS

Most of the issues with sub-par or failed outsourcing endeavors can be attributed to a few
pitfalls.
Transition Pitfalls and Risks
1. Inadequate investment and sponsorship
2. Unclear scope of work
3. Training shortcuts
4. Unclear roles and responsibilities
5. Not retaining the experts

Transition Critical Success Factors

The success or failure of a transition project is fundamentally measured in two aspects:
 Technology Readiness – state of readiness of the enabling hardware and software to
support ongoing operations.
 Manpower Readiness – state of readiness of the operating staff; hired, trained, and skilled
for the service processes.

Transition Effectiveness
Financial Benefits
It is important to quantify the real cost of the function before off-shoring (baseline costs), and
also to measure the cost of the off-shore team on an ongoing basis.
 Costs related to moving the function to the new team should be tracked separately as
project costs.
 Capturing these cost elements enables comparison of baseline costs with current costs,
and provides an accurate measurement of the saves.
Performance of the Team
 Primarily done by developing performance metrics
 Usually subject to a testing phase to determine reasonability of the service measures –
also known as the “baselining” period.

DOCUMENT READINESS

Document Readiness: Inputs

1. Inputs are documented
  Source systems (refer to any system or file that captures or holds data of interest…ex:
banks) and dependencies are important
 Timing of delivery quality assumptions and work-around (method of overcoming a
problem or limitation in a program or system) in case of failure in delivery of some inputs.
Examples are historical timeliness and accuracy statistics. Helps size service provider
(third part or outsourced supplier) resources needs, helps identify likelihood of work-
compression (rushing 3 hours work in 1 hour) or overtime ( working late to keep to
output delivery targets)
 Format of inputs
Structured data is most often categorized as quantitative data, and it's the type of
data most of us are used to working with. Think of data that fits neatly within fixed fields and
columns in relational databases and spreadsheets. is written in a format that’s easy for a
machine to understand. Examples are spreadsheets and data from machine sensor.
Unstructured data is most often categorized as qualitative data, and it cannot be
processed and analyzed using conventional tools and methods. It is more like human
language, it doesn’t fit nicely to relational databases. Examples are emails, text documents,
videos, audio files and images.

Document Readiness: Process

1. Processes are documented in industry standard format (CSV messaging standard- format
used for describing data in the tables or spreadsheets….ex: 12345, Smith, John,”3 , Acord
messaging standard and in complete detail.
 Hand-offs to other parties, internal and external, are documented including timing and
format
 Interim/flash reports, if required are documented as deliverables. Delivery time, day-of-
month, period targets are documented.

2. Required tools, macros, workflow, application, shared directory access are listed in
sufficient detail to allow replication in the service provider

Document readiness: Output

 1. Interim/flash (temporary and intended to be used or accepted until something permanent
exists) and final outputs are completely documented
 Formats are completely defined
 Control steps and quality assurance checklists (used to assess the quality of a product or
service) are defined
 Delivery time/day-of-period are defined; these are reviewed to ensure that they are
achievable/consistent with input timelines
 Service provider and transition project manager (take care of successful program
transition for our most strategic clients) should that timelines are current and not
aspirational; tendency to put in desired/unrealistic deadlines when outsourcing

Documented Readiness: Communication

1. Communication channels for output (include face-to-face communication, broadcast

media, mobile channels, written communication) to be explicitly defined
 Clarity here minimizes misunderstanding during early production period
 Especially if the output is an input to another process

Document Readiness: Supervision

1. Onshore supervision points and what will be reviewed/checklist should be defined

 Some country regulations (US) require clear trail of supervisory control by an
Onshore person
 Responsibility for output (eg financial statements) rests with an accountable
onshore officer
 For shared service centers particularly, clear documentation on areas of supervisory
review paves the way for transition into “center of excellence” mode where
supervisory control rests offshore

WORK-SHADOWING
 The term used for “learn-by-doing” activity of service provider personnel, generally done
at the same location as current company performer.
Phases of Work-Shadowing
1. Onshore personnel doing activity
 Service provider staff reviews documentation provided against actual activity done by
onshore personnel.
 Changes in documentation are done.
  Re-sizing of required staffing may be negotiated at this point.

2. Guided service provided network

 Service provider performs the activity; onshore personnel looks over and gives close
guidance.
 May be done onshore or at service provider site.
 Completes 1 or 2 full cycles: if output is monthly, guidance is given for a few days.
 Generally, 1 to 2 months of guided work.

3. Go-live
 Service provider performs the activity independently at service provider site.
 Performance targets in place and required.
 Changes in sizing or process (to correct erroneous training provided by onshore) now falls
under change-request process and governance.
 Need to loosely monitor for a period of 3 months to ensure stable performance.
Readiness Assessment
It verifies if process to be outsourced is:
• Adequately documented
Poorly documented current process will result in:
1. Most current in-house processes operate on tribal knowledge, undocumented steps
2. Service providers adding “uncertainty” on process premium in their proposals–not very
clear what will be delivered, how, and by when.
3. High probability of he-said-he-said misunderstanding during initial phase of production.
4. Long work shadowing period and high cost as service provider tries to document required
process
• Correctly-sized in generic resources
a) Most current processes done in-house operate with long-experienced staff (veterans in
role). 1 FTE (full-time equivalent) with 20 years on-the-same-job experience is not equal to 1 FTE
with general experience no matter how bright or expert or diligent.
b) Without readiness assessment, the company will estimate the current cost low. The
receiving provider may incorrectly size the role, may have to initially use 2 performers (with very
structured steps) to do same 1 FTE job until knowledge is gained/documented.
• Resource sizing already includes the right level of quality assurance and supervisory
control
a) Most in-house processes rely on veteran performers with long-developed “business
acumen” that allows unstructured sense-check for quality assistance.
b) Most contracts (especially shared service center migrations) are under-configured because
QA/supervisors are not included.
c) Why is incorrect (under) sizing a problem? Because service providers will inevitably use
the “change request” process to add to the cost.

SCALE
Scale refers to the number of employees.
Sufficiency of scale refers to the following:
 Service provider – It is a vendor that provides IT solutions and/or services to end users
and organizations. This broad term incorporates all IT businesses that provide products
and solutions through services that are on-demand, pay per use or a hybrid delivery
model.
o Service provider must have a favorable performance track record for this would
be additional points to influence the eventual decision of the client.

 Requirement of the Job – requirements can be described through; volume capacity of

transactions, complexity of the job, expected cycle-time for job completion.
Requirements of the job could potentially change as the requests and/or demands of the
client change.

 Client – A client is the receiving end of a service or the requestor of a service in a

client/server model type of system.
o The client can freely make decisions that will directly impact the service
provider’s hardware, software, and people-ware capabilities.
o For example, a client opts to add technical assistance on top of billing and
service activation-deactivation. The service provider must respond by out-
fitting current people-ware with the technical knowledge of the client’s product
and/or services.

Scale in relation to Workforce

 Sufficiency of scale depends on the service provider – for risk management
o A 15, 000 Full Time Equivalent (FTE) provider in a single location may prefer
engagement of at least 500 FTEs (5% is normal buffer of resources, can be
ramped up easily or absorbed in other clients when contract ends)
  Right scale depends on client – percentage of outsourced roles to total staff, for risk
management and control.
o A 500-person Finance organization may want to limit initial outsourcing to say
10% or 15%
o A large company with experience in outsourcing may opt to outsource the entire
technology group (from data centers to application development to helpdesk)
to a provider – especially if core business is non-IT.

Tips to Optimize Scale

 If the process to be outsourced is done by only a few FTEs, it is not worth outsourcing.
 Near self-contained roles have good potential for outsourcing – because more FTEs
covered.

For Scale to work, it must be considered to both sides client and service provider. In each
instance both parties have to consider the following:
o End-to-end roles are ideal (start from external contract, ends with external contract with
only 1 or 2 intermediate hand-offs for review/approval)
o Product Profit Loss starts with transaction data download and ends with submission to
regional/senior management; intermediate activities (market price verification,
calculation of mark-to market value) are fully done by service provider.
o Buyers need sufficient FTEs in outsource project to justify risk and executive attention
(sourcing management, finance/payments, legal)
o Service provider needs sufficient FTEs to justify a risk, supervisor, and overhead.
o Large and small engagements have near same “overhead” in support – except for very
large contracts.
o Training
 An undertrained employee is more likely to; be less efficient or slower, consume
or waste more resources, cause delays, cause more instances of service related
complaints, require unnecessary on-the-job guidance/supervision, and strain
inter- as well as intra-team relationships.
o Improve hardware and/or Enhance Software
 Provide for more, or improve what you have. In the “provide for more” this
assumes that what you have is the best possible current iteration of the available
resources. In the “improve what you have,” you retain the resources but merely
upgrade or replace with an alternative that offers more.
 Software does not exclusively refer to applications or operating systems. It also
refers to an intangible that drives the business. This includes vision, mission,
values, policies, procedures, culture, management style, leadership style of the
company.
Identifying Task Candidates for Outsourcing: Time tracking
 Time tracking is simply the measurement and documentation of hours worked.
 It is when each current performer tracks his activities, how much time is spent on each
task over a period of 1-3 months.
 Time-tracking into granular task buckets is good way to identify potential roles for
outsourcing
 Record how much time is spent each day in specific task groups
 Helps managers assess whether the work can be simplified.
 Highlights task that occupy a lot of people’s hours
 Some high-volume tasks may need further analysis to identify specific roles.
 Other “sub-filters:”
(a) Do not require complex market knowledge,
(b) Do not have high financial or regulatory risk,
(c) Task which are self-contained (have minimal hand-offs)
References:
http://knowledgehills.com/transition-management/transition-management-tutorial.htm
https://www.servicefutures.com/difference-change-transition-management-service-outsourcing

Techopedia. Service Provider. Retrieved from https://www.techopedia.com/ definition/22021/

service-provider
Techopedia. Client Retrieved from https://www.techopedia.com/definition/437/client
Hubstaff. What is time tracking? Retrieved from https://hubstaff.com/time_tracking