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Planning and Managing Transitions with Third Party Service Providers
In outsourcing engagements, organizations turn over ownership of a non-core, important function or activity to a provider in order to get maximum benefit of a provider’s expertise, economies of scale and access to resources. To ensure success there should be a carefully drawn out transition plan. Often overlooked, a transition plan and related costs are critical to a successful outsourcing engagement. Several types of transitions occur in any type of outsourcing contract, and all must be handled properly if the contract is to succeed.
(Bragg, 2006) described transition as the process of moving an organization’s function to a provider that has many common elements regardless of the type of function being moved. The transition to a provider should follow a predetermined sequence of actions. The simpler the function or activity outsourced, the fewer the steps or actions to be taken or vice versa. Critical functions may fail during transition which may impact on the ability to operate. In addition, fast transitions do not give providers enough time to review an outsourcing organization and may result in an incorrect bid price that would require renegotiation to make it more equitable. To ensure success both parties would be required to formally sign-off on steps completed before moving onto the next step. However if a party is not willing to cooperate, then more time would be required until the particular step is accepted by both sides. According to Goolsby (2001b), a transition plan should be from the outsourcing organization to the service provider management and should also detail costs involved in the transition process, and at the same time map the process by which the service provider becomes involved in the organization’s activities and/or projects. Potential impacts on internal staff and end users should also be identified. An outsourcing organization could determine the result but would not be in a position to dictate how the process should be performed. Determining appropriate service level specification is a crucial foundation for successful outsourcing because it is the only way to ensure a comfort level for an outsourcing organization to set required service level specifications and then regularly measure a provider’s performance to determine whether those levels are achieved. Bragg (2006) further stressed that outsourcing organizations should create measurements that track a provider’s day-to day performance as well as measurements that can be used to pay a provider more or less money based on how the process improves an outsourcing organizations’ revenues or reduces its costs. Therefore, a baseline set of measurements should be calculated prior to transition to a provider to enable the outsourcing organization to have a measurement to compare the provider’s performance with its own. Once a function is outsourced, measurements should be stored in trend lines so that sudden changes in measurement can be investigated to see if problems are occurring. An outsourcing organization should use its own staff to collect measurements information and perform calculations in order to obtain measurements that are not skewed by providers who want to achieve the best possible results.
Goolsby (2001b) further emphasized that service level specifications play two vital roles in an outsourcing engagement, they ensure accountability on the part of a provider and they determine the price of a service. However, Hamer (1988) mentioned that a service level or performance specification should be developed outlining desired response times, personnel and equipment resources as well as training results. Furthermore, since specifications would impact the price a provider will charge for services provided, the cost of such services would rise because they are setting very service level specification. Accordingly, the outsourcing organization’s desired results as specified in the service level specifications would determine the price. Therefore, outsourcing organizations must clearly determine the scope and boundaries of an outsourced process before results can objectively measured, by ensuring that service level specifications are not ambiguous and are tied to desired results. Service level specifications can actually drive down price (Goolsby, 2001b). However, the most important focus for outsourcing organizations when writing contractual agreements for outsourcing is to eliminate risks. This is best accomplished through a clear, effective description of the process to be outsourced together with clear, effective and objective service level specifications. In addition, to achieve a win-win relationship, Goolsby (2001b) advised that both parties must rely on the service level specification to determine where a provider’s focus should be because such a specification identifies the outsourcing organization’s goals and the provider’s guarantees, together with continuous improvement in the outsourced process. However, defining vital components of a contractual relationship is tedious and time consuming, unavoidably it is the only way outsourcing organizations can achieve results.
Selecting the Third Party Service Provider
In the last 5 years, the business environment has developed at a rapid pace, such that senior executives that seek to keep their business competitive and fully optimised relative to the people-process-tools balance can no longer afford to ignore globalisation, offshore sourcing or full scope outsourcing (Fersht, 2006). With more service providers in every outsourcing category, coupled with the rapid pace of change in technology, selecting service providers seems more complex than ever. Effective solutions should go beyond addressing current business function, but must be constructed to evolve as new IT and business objectives develop over time. Therefore, outsourcing organizations should not select a service provider based on only sales presentations but on substance (Goolsby, 2001a). However, effective solutions to complex business problem always involve more than tools. They include people and processes. Since work performed by a provider would have enterprisewide business impact, providers must be able to ensure business continuity. It is also imperative to choose a provider that can put all pieces together, no matter how complicated tools and processes become. Nevertheless it is rare to find a single provider that can effectively deliver a comprehensive, fully integrated solution (Goolsby, 2001a).
According to Lynch (2000), the basic premise of outsourcing is that a company is selecting a logistics provider that is well qualified to perform logistics functions and who will do so it in a satisfactory manner acting on their own initiative. Therefore an outsourcing organization’s selection of a most appropriate service provider is critical to the outsourcing return on an investment because in outsourcing, a provider delivers services to an outsourcing organization using resources owned and managed by the provider. Additionally, the provider’s capabilities and partnering approach provide a key component to delivering value (Fersht, 2006). Furthermore, the selection of service providers is a task which demands close and careful attention particularly if a contract is to be offered as a partnership agreement for a broad range of services over a long term by a single provider. Therefore, to ensure that the most appropriate provider is selected, certain principles must be observed if the selection process is to be conducted efficiently and a long term relationship be formed. Thus, a selection process should start with a bidding process and a specification of service levels as well as the commercial terms (Barrett and Baldry, 2003).
CHAPTER I INTRODUCTION
1.0 GENERAL INTRODUCTION
1.1 The Decision To Outsource
1.2 CONCLUSION
1.3 THE PROBLEM AND ITS SETTING
1.4 AIMS AND OBJECTIVES OF THE THESIS
1.5 THE HYPOTHESIS
1.6 DELIMITATION
1.7 THE ASSUMPTION
1.8 IMPORTANCE OF THE THESIS
1.9 DEFINITION OF TERMS
CHAPTER II LITERATURE REVIEW
2.0 GENERAL INTRODUCTION
2.1 OUTSOURCING MILITARY FUNCTIONS OF PEACEKEEPING OPERATIONS
2.2 OUTSOURCING SUPPORT FUNCTIONS OF PEACEKEEPING OPERATIONS
2.3 MAKING THE DECISION TO OUTSOURCE
2.4 THIRD PARTY LOGISTICS SERVICE PROVIDERS
2.5 THE TRANSITION TO OUTSOURCING
2.6 DECISION-MAKING CRITERIA
2.7 DECISION-MAKING SCORECARD
2.8 SUMMARY
CHAPTER III DATA COLLECTION AND METHODOLOGY
3.0 INTRODUCTION
3.1 METHODOLOGY
3.2 INSTRUMENTATION
3.3 DATA COLLECTION
3.4 SAMPLE
3.5 SUMMARY
CHAPTER IV PRESENTATION AND INTERPRETATION OF DATA
4.0 INTRODUCTION
4.1 ANALYSIS OF CONSOLITDATED DATA FROM THE GROUPS
4.2 ANALYSIS OF DATA FROM THIRD PARTY SERVICE PROVIDERS
4.3 ANALYSIS OF DATA FROM MANUFACTURING FIRMS
4.4 ANALYSIS OF DATA FROM UN PEACKEEPING OPERATIONS
4.4.10 United Nations Mission in the Sudan (UNMIS)
4.5 DECISION-MAKING CRITERIA AND SCORECARD
4.6 OUTSOURCING SUPPORT SERVICES AND FUNCTIONS
4.7 CONCLUSION
CHAPTER V SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.0 SUMMARY
5.1 CONCLUSIONS
5.2 RECOMMENDATIONS
5.3 RECOMMENDATION FOR FUTURE STUDIES
REFERENCES
