Making the Move: Top Strategies for Managed Services Transitions

Would you trust your managed services transition to a coin flip? Without proper planning you may be taking just such a gamble. For nearly every managed services deal that goes without issue, another one goes poorly. Heads you win, tails you lose.

Most enterprises think they understand the desired outcome and timing of a managed services transition but more often find themselves struggling with the results, cost and ultimate impact on the business. ISG Research indicates that a typical transition will take five to six months depending on the size and scope of the contract and will cost three to four percent of the total contract value (TCV) – which amounts to a significant investment.

To take the risk out of transitioning to a managed services provider, enterprises need a solid contract and careful planning. The contract must carefully stipulate exactly what is being handed over and how the relationship will be governed over the long term. The planning must be based in the enterprise’s reality and comprehensive. A transition represents the first real test of a new provider, and the outcome sets a tone that can potentially resonate for the life of the contract.

How to Write a Contract for a Managed Service Transition

A solid contract will outline the initial situation and target scenario and will specify the transition approach. It will carefully define the services to be delivered by the provider, critical delivery components, work packages, dependencies and milestones, and it will stipulate the rules for delivery, inspection, acceptance and defect resolution.

Planning is the essential foundation for a successful transition.

Ideally, the contract will include verifiable acceptance criteria for all critical delivery components. This includes early determination of templates or samples for all deliverables to clearly delineate the scope of services and deliverables. Attention to detail and clarity strengthen the enterprise’s position before its negotiating power diminishes after contract signing.

The contract also should describe in as great a detail as possible the planned transition governance, which expands during the transition phase and later evolves into operational governance after the service commencement date.

Since employees from managed services providers usually bring different experiences from prior engagements, the enterprise buyer should establish a competent transition management team to oversee the transition. This team will need to ensure a common understanding of how the transition should be executed in terms of transition approach, method, client contribution and deliverables. We recommend a transition simulation or “dry run” at a very early stage and as a part of the transition planning.

Tactical and operational decision-makers from both the service provider and the enterprise client will need to have authority regarding budgets and personnel resources to decide on issues and problems. Particularly in large enterprises, effective governance should fall to actual decision-makers to avoid later inefficiencies.

What To Do Before Signing the Contract

Before signing a managed services contract, an enterprise should be sure the provider has an accurate picture of its initial situation, scope of work and performance objectives. A maturity assessment will help the provider make a realistic estimate of the effort required for the transition.

During negotiations with providers, the enterprise team should carefully scrutinize the contract documents for “assumptions” and “risks” that may hide exclusions that could later expand the scope. Be sure to resolve all assumptions before signing the contract.

A solid transition plan should be based on key data points. These include information and metrics on the ITSM platform, ticket analyses, policies and standards, reporting requirements, the quality of existing IT documentation, the scope and condition of the IT landscape, and the maturity level of the IT organization. The more meaningful data the provider receives, the lower the risk of unpleasant surprises. The risks identified during due diligence should be precise, enterprise-specific and include concrete counter measures for all parties involved. These measures will be a critical part of the transition plan.

While the time it takes to transition managed services used to vary widely, providers are getting to the point where we can expect predictable timing based on technology, vertical and geographic locations.

One of the first steps should be to determine the organization’s “outsourcing readiness,” including the maturity level of the services, service management and the provider steering organization. This also involves conducting internal pre-transition preparations in parallel to contract negotiations. Define the future roles for provider management and prepare future staff for these roles.

Organizations often underestimate the effort required for reorganizing and managing personnel development, especially in cases of first-time outsourcing or when previous service areas have not operated under a managed services model.