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Managing an Outsourcing Initiative-Phase 4

Originally published: March 2011


Phase 4 – Implementation

In the first three articles in this series we discussed planning, selecting a vendor, and the documents necessary to launching a successful outsourcing initiative. Now we're ready to talk about implementation.

Implementing an outsourcing initiative involves transitioning the outsourced process from in-house to the provider. This is an area where effective management of change is essential on both sides. In fact, according to research done by TPI, an Information Services Group company, unmanaged (or mismanaged) changes are the biggest problems clients face in outsourcing implementation.

It is critical, therefore, to completely capture and communicate all critical elements of the project. Both the organization doing the outsourcing and their selected outsourcing partner will need to:
  1. Assign a dedicated Project Manager. These project managers will help manage all phases of implementation at each organization, including project planning, task assignments, issues and resolution procedures, and status reporting. It’s key that the project manager on each side stays in close communication with his or her counterpart.
  2. Jointly complete a Requirements Study. This study should detail the systems, processes, and personnel requirements necessary on both sides in order for the project to meet the organization’s expectations. Also included should be how the requirements will be implemented in the new environment (at the outsourcing partner) and supported (by the outsourcing organization), as well as a full description of the work process and customizations required.
  3. Establish a project timeline with designated milestones and sign-offs. At key points throughout the implementation, the organization should sign-off on the completion of major milestones. These sign-offs serve to indicate an agreement between the organization and the outsourcing partner that the specified deliverable has been completed to the satisfaction of both parties.
  4. Develop reporting. Both parties should jointly develop the reporting necessary to determine the success of the initiative based on the organization’s expectations.
  5. System testing. Before going “live”, a test should be made to ensure that the new solution works correctly, is complete, and meets the organization’s specifications as previously outlined in the definition of project requirements.

Staff-Related Risks in the Implementation Phase

It is important to be aware of the following staff-related risks since they can result in delayed implementation or even a failure of the entire project. Any of the following should send up a red flag:

Organization’s implementation team is not in place or has a poor understanding of the contract and project requirements. Throughout the implementation phase, and going forward, the organization must commit an appropriate level of management staff, knowledgeable in all aspects of the initiative, to the project. Their focus should be to manage the relationship with the provider, ensure that the implementation process moves ahead as planned, and to handle any disputes and escalations. A process for resolving misunderstandings should be defined and in place, as well.

Organization’s team lacks required skills. According to TPI’s research, 60% of staff assigned to manage the implementation and operations of an outourcing project have no prior outsourcing experience. And, 80% of companies initiating outsourcing don’t provide their team enough ongoing training.

Resistance within the outsourcing organization’s staff. Employees effected by the outsourcing initiative may be threatened by the changes it involves, worried about their job security, or resistant to new technology and processes. These issues can inhibit the project’s success. Fully defining an employee transition plan, keeping staff “in the loop” about the project and its objectives, and making them part of the team effort can allay these fears and help to ensure success. Each milestone should be communicated. This will mitigate any fears they may have concerning the project, encourage “buy-in”, and may very well generate valuable suggestions for improvements to specific processes.

Conclusion

Signing an outsourcing agreement should not mean the abdication of the organization’s responsibility for the business activity. Effective management of the relationship with the provider and the implementation process, along with essential communication with all parties directly and indirectly involved, will be key to the success of the project.