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Guide to ICT Sourcing - Phase IV: Transition and Manage

Phase IV: Transition and Manage

Contents of this Chapter:

The purpose of this phase is to transition to, and set up management of, the new sourcing strategy. While these activities are relevant to agencies that are changing to a self-managed or external strategy, the vendor management elements in this phase are only relevant to external vendor strategies.

The first step is to set up contract governance after which agencies can begin the transition. This is never as simple as turning off the old solution and initiating the new one. Transfer of knowledge, assets and staff, and migration of work-in-progress could take between three and ten months. One of the key objectives for the agency will be to make the transition as transparent as possible to the vital business functions.

Agencies then need to focus on managing ICT, which entails managing the relationship, managing the contract, and managing ICT operations. Finally, agencies need to establish processes to periodically review performance.

This guide has been prepared based on the assumption that agencies already have knowledge across many of these elements, as well as access to existing Australian Government publications that provide guidance on these issues. As a result, Phase IV is less detailed than the other phases.

Set up Contract Governance

All agencies that manage a vendor need to set up contract governance for their arrangements. As it affects the overall pricing, contract governance should be encapsulated within the agency’s overall ICT governance and have been outlined in the tender documents and specified in the contract.

Defining the contract governance structure consists of identifying the ICT roles and responsibilities, the management organisation, the decision-making process, a process for escalating disputes, and the rules and incentives for all parties involved with the arrangement, including:

The agency needs to establish three important management roles, each of which is discussed later in this phase. They are:

Agencies should establish a team to oversee these roles. Large and complex sourcing arrangements may warrant a dedicated program office.

The team/program office should have overall accountability for the success of sourcing, including budget responsibility. It should report directly to senior management and provide easily understood, reliable, and robust information for informed decision making. This will enable senior management to take ownership of the overall ICT sourcing strategy, ensuring sourcing receives the attention it deserves and that issues raised are quickly resolved.

Transition

This step is a one-time effort that occurs each time a new element of the sourcing strategy is put in place. Transitions occur concurrently with other significant business and/or IT initiatives and are typically high-impact time-bound business activities. This can create difficulties in maintaining momentum and focus when other significant change is occurring.

A variety of factors can drive the need for transition arrangements, including changes to:

Transition should be managed as a project. Milestones, deliverables, and roles and responsibilities, together with a management and communications process must be clearly articulated. Suggested milestones include:

Three of these milestones deserve particular attention:

The most important factors to understand before a transition are business risks, especially when the transition involves moving away from an incumbent vendor, which often takes more than six months from hand-over to take-over. This represents one of the biggest changes the agency will face, and it must be done carefully. This change should be transparent to the business, and there should be no business deterioration during the transition.

Any agency facing such a change should minimise business risks and define this as a first priority. In some instances, it could be so important that an agency is willing to opt for a less appealing alternative in the long term if it provides a safer transition.

Manage Relationship

This guide does not address this topic, as it has a strong link to each agency’s individual culture and management style.

It is worth noting, however, that managing the relationship is a key element of the sourcing lifecycle to which agencies and vendors must pay careful attention. All agencies, whether coming from a transition exercise or not, should make sure they optimise control over their current relationships.

It is important to distinguish the relationship from the contract. Managing the relationship is about maximising the overall business outcomes of the arrangements. Keeping the relationship separate from the contract will ensure agencies maintain a business perspective over all arrangements, and will help mitigate legal difficulties that often occur during the life of a contract.

Effective communication is critical in smooth transition arrangements and in sustaining working relationships between all stakeholders. The following issues merit consideration:

For management

For affected staff

Manage Contract

This guide does not address this topic; it is an area that requires specific legal expertise. However, it is important to provide some business context.

From a business perspective, agencies should recognise that the aim of managing the contract is to ensure:

A service gap exists if all parties are not performing according to their minimum requirement levels. If this is the case, steps should be taken to close the gap by reviewing existing service levels against the Service Level Agreements (SLAs), or by using the flexibility that should be built into the contract to make a variation.

A contract gap exists if the contract does not reflect the best possible expected outcome for the agency. In order to close this gap, agencies need to consider whether to renegotiate the contract to establish updated arrangements, recognising that opportunities and constraints may have occurred since the previous contract was signed.

However, signaling a renegotiation is a serious step for which agencies need to first clearly establish the benefits and risks.

Figure 25 shows both a service gap and a contract gap.

Figure 25: Service and a contract gaps

Service and a contract gaps

Manage Operations

This guide does not address this topic. But, it is worth making some observations.

Day-to-day management of ICT operations is the agency’s role; it must ensure the ICT services always support the agency’s business needs. The team accountable for this role should be knowledgeable about relationship and contract management. However, keeping contract, relationship and operations management roles separate will allow each team to focus on the highest quality service delivery.

Experience has shown that contracts are most successful when there is close integration between vendor and agency, regardless of whether the vendor is providing commodity processing or highly specialised services. Among other things, this will help ensure a certain degree of flexibility for adjusting the level of ICT service if and when agency needs change. For more information on this topic, refer to the SourceIT website.

Review Periodically

The most carefully considered ICT sourcing arrangements could fall short of delivering expected benefits. Moreover, even arrangements that are performing to plan need to be periodically reassessed to determine whether more value could be delivered.

It is important to set up ongoing reporting processes for measuring the performance of a sourcing arrangement. Agencies should establish scorecards against which to track performance, to plan and to track current market circumstances. It is also important to track any changes made to the contract itself.

The critical success factors for any transition arrangement relate primarily to effective planning, clear communication and right-people-right-place dynamics. Examples of success factors should include:

Contact for information on this pages: ICT Procurement

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Last Modified: 14 January, 2009