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6 Steps for Overcoming the Challenges of Service Transitions

Elod Herczeg

Pre-Sales Analyst, EPAM Hungary
Blog

The fast pace at which today’s business and legislative environment is changing is leading many companies to outsource IT services so they can leverage external skills and knowledge, optimize costs and focus on their core business.

For example, in the UK the new IR35 reform, which will come into effect in April 2020, is causing many buyers to rethink their strategy: Do they convert all existing contractors to full-time employees? Do the contractors even agree to become full-time employees? Or do they outsource the entire service? If a company does decide to transition to a new IT vendor, they risk partnering with a vendor who doesn’t deliver at the expected level.

However, if the challenges with a company’s current vendor are so big that it costs more in the long run  to make all contractors permanent employees or stay with its current non-performing vendor, transitioning to a new vendor could be vital for a smooth and successful operation. But finding an ideal vendor who can deliver on their promises is easier said than done.

In order to do so, buyers need to make sure that they:

  1. Understand the risks and goals related to the transition
  2. Ensure service transition success
  3. Build trust with the new vendor and increase performance

In this post, we will share a six-step process that ensures a successful transition.

UNDERSTAND THE RISKS & GOALS

Jumping into a transition is often like building a house by starting with the roof—it’s an integral step, but never the first step. A strong foundation always starts at the requirements level, so buyers first need to understand where they are now and where they want to be.

Step #1: Understand the as-is state.

The aphorism “know thyself” is more than punchy advice for individuals. Before moving forward, buyers need to do some introspection to understand their current status and the risks they face if they don’t make any changes. Questions to ask include:

  • What percentage of the workforce are contractors?
  • How much knowledge will be lost if they depart?
  • How well is an existing vendor performing?
  • How is their performance measured?

The key challenge here is to conduct a thorough assessment that covers all crucial areas and prepares the organization for a successful transition. While this is a complex topic that we won’t explore in detail here, it’s generally a good approach to have a committee oversee the transition, which includes a project manager who monitors costs and manages the committee, subject matter experts, service managers and agile coaches.

Although gathering this information means extra—and often hidden—cost, it’s imperative for buyers to do this early in order to minimize ad-hoc spending during the transition phase and to make sure you identify the right vendor. 

Step #2: Articulate the to-be state.

In general, buyers usually have a cursory understanding of what’s missing from their current operating models. Vendors may say that they offer cost reduction or better performance, but these statements often aren’t helpful unless they are given in the appropriate context. For example, better performance on connectivity may not be as important for a buyer who is looking for quicker turnaround times on support tickets.

Buyers need to define a clear vision and shift their focus to asking the right questions. One question could be, “How can the new vendor enable our business to better serve our customers?” It establishes selection criteria that will lead to a partner who can deliver what a business really needs. Once this benchmark is set and articulated, it can help onboard internal employees and provide a good starting point for vendors to tailor their approach.

ENSURE SERVICE TRANSITION SUCCESS

After the vendor has been selected, it’s time to switch services. A transition is successful if it lays the groundwork for the new vendor to become better than the predecessor.

Step #3: Set up a governance team.

Buyers often assume that the responsibility of the transition is entirely on the vendor, overlooking their own change management responsibilities. This can result in a long transition process complete with difficulties in the production environment and the inability to meet deliverables. To lessen this risk, buyers need to augment the transition committee with experts from the vendor as well as from their own team as part of the onboarding phase.

This is when a comprehensive readiness assessment, divorce terms and established requirements prove invaluable, helping the new vendor by equipping them with quality information to plan accordingly.

Step #4: Transfer knowledge.

Ensuring that a team of engineers, analysts and consultants gain a thorough understanding of the buyer’s organization, applications, tools and processes is a significant task that brings a wide range of challenges in terms of coordination, communication and culture for both the buyer and the vendor.

There are two main reasons for poor knowledge transfer. The first one is due to governance teams that might carefully organize trainings, orchestrate shadowing and prepare important documents but might fail to facilitate communication or encourage cultural alignment between teams. Another reason for poor transitions is incumbent vendors who are not incentivized to cooperate with new ones. To avoid a poor knowledge transfer, the vendor and the buyer equally need to be vigilant about open and honest communication between all stakeholders.

BUILD TRUST AND GROW TOGETHER

Once the new vendor has reached a steady state, it’s time to thrive. Since the challenge most CIOs and CDOs face nowadays is to increase time to market and deliver more with a nearly flat budget, vendors must prepare to either decrease delivery risks or increase cost efficiency, which can only be done with a co-operative buyer who offers authority and support.

Step #5: Increase predictability.

Estimating work more accurately is gaining importance since CTOs are now facing tighter budgets. Since risk and cost are directly proportional to each other, vendors can decrease ambiguity by creating better forecasts leading to cost reduction. The caveat, however, is that making better forecasts by itself isn’t enough if the delivery isn’t consistent.

Once accurate forecasts have been made and delivery is consistent, vendors are more likely to agree to be held accountable for certain delivery outputs, making the engagement more predictable, cost-optimized and mutually-beneficial. This builds trust over time, which is key to great partnerships.

Step #6: Increase output.

Vendors are also expected to enhance their output over the course of the engagement which can be done in two ways. They can either provide additional services and simultaneously increase economy of scales or introduce small improvements that build a more impactful delivery.

Regardless of the option they go with it can only be done if the vendors are empowered by the buyers (for example by using output-based pricing models) to take initiatives and execute their ideas. Once vendors dare to constructively challenge the way their buyers operate, the transition officially finishes and starts to evolve into vendor transformation.

CLOSING THOUGHTS

In many ways, starting a transition is like starting a long-term relationship. It requires self-assessment, preparation, good timing, honest conversations, meaningful work and trust from both sides to make it successful, and only time can tell whether it was a good choice.

Technological advancement is happening at a rapid pace, industries are being disrupted in a matter of years, competition is intensifying and new legislation can subvert old business models. Therefore, selecting the right vendor who can adapt to and leverage these changes to benefit the buyer has never been more important than it is today. Those who sow the seeds of good partnerships with the right vendors today will reap the benefits tomorrow.

See how EPAM delivers smooth and effective vendor transitions.

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