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An Outsourcing Story – Why (and How) Law Firms Outsource Their IT Operations. Part Four of Five.

January 17, 2013

Part Four – ITT and Transition

OK once you have decided on the scope of your outsourcing engagement you need to identify a ‘long list’ of potential providers – typically around six. This list may include others that you have heard of offering outsourcing in the Legal sector, it may also include third parties who you already use and even services organisations who are clients of the firm.

This post looks at the next two stages, final selection (with an emphasis on the ITT/RFP process) and transition to the chosen provider.

Invitation to Tender

The purpose of this exercise is to identify a short list that you will invite to present and discuss their proposal in more detail. There are four key objectives of this activity:

  1. Obviously, get to a short list
  2. Identify areas of concern or potential weakness that you will probe in the presentation/discussion phase.
  3. Baselining the service you require. This is a key point – most contracts are ‘output based’ i.e. they require a provider to deliver a specified set of services (e.g. DMS) at a defined level of service (hours, availability, performance etc.). I also want to contract any provider to undertake the ‘inputs’ i.e. all of those activities that assure the delivery against the targets (e.g. security management, capacity planning, configuration management…).
  4. Setting the baseline for the contract negotiation – this is often forgotten but you are now in your strongest negotiating position, ask now for confirmation that the provider will accept particular terms. E.g. they will provide, free of charge, all required support to transition to another services organisation in the event that the contract is terminated.

Depending on the scope of the outsourcing deal under consideration, I typically have seven sections of questions. I will ask questions in three categories) – Cost, Risk, Competence. Remember, some organisations claim to have experience across the whole scope of your anticipated engagement – you need to probe pretty hard to uncover those who don’t have the experience and expertise that they claim

At this point I will also establish a scoring schema to allow an objective assessment of the responses

The seven sections are:

  1. Build – In the case where you are physically moving (and/or upgrading) hardware and software you need to set out your needs and ask for a technical design that is proposed.
  2. Transition – Ask for a detailed project plan describing the creation of the capability (technology, applications, processes, skills etc.). Acknowledging that this is the highest risk element of the undertaking you also need real detail around the testing approach (your main risk mitigation tool). You might also ask
  3. Operate – This is the provision of Data Centre services and the typical operations activity such as monitoring and hardware maintenance.
  4. Manage – It is in this section where many providers in the mid-market fall down. You really need to make sure that potential partners really understand all of the system and service management disciplines that are required.  Using ITIL as a base, ask questions that help you understand all of the proactive activity that they will undertake to ensure that the availability, performance and return to service targets (in the SLAs) can be attained. Most will offer ITIL accreditation; on testing many will not demonstrate a real understanding or expertise here.
  5. Company – The usual company stuff that will allow financial due diligence to be completed but also questions around their culture – this is important as any potential partner is a part of your extended organisation.
  6. Downstream – Once you have outsourced elements of your IT, you will inevitably uncover requirements that are outside of the scope of the outsourcing contract. This is the time to negotiate a rate card. Further, you need to consider how charges will vary if your business volumes vary. You might also ask about any ‘added value’ that is offered by partnering with this organisation.
  7. Contract – get some of the key contract elements into the open here – termination, audit and non-performance are ones that are tricky to negotiate once you have reached the preferred bidder stage.

The above sections of the ITT are the key elements of the document but you also need to provide information regarding your organisation, the ITT process & timetable, the specification of your requirement (this is detailed further in the questions), your existing infrastructure & systems, and details of the service you require (including SLAs).

From here you will get to a shortlist and then you go deeper into the questions, nailing some key contractual elements and refine your scoring – and selecting your preferred bidder!

I’m not going to mention much about the contracting stage (you are the lawyers!) suffice to say that the contract should include a schedule that requires the provider to deliver against the commitments he made in responding to the ITT.

Transition

Once the contract is signed then you are set to go.

Some suggestions or key success criteria:

  • The partner will run the transition project. You also need to budget for time and resource to be part of the project team.
  • Change control is key – no change to the scope of the solution, the service or the cost base should be allowed without formal client sign off.
  • Establish strong project governance to make sure that the firm’s management are up to date with progress, risks and issues and are able to make decisions to unblock any obstacles.
  • Remember that the project isn’t just about transitioning technology; it’s also about making sure knowledge is transferred, service reporting is established (against SLAs) and that the new operating model is understood and properly implemented.
  • Test, test and test again. Make sure you have a strong and detailed test plan (you should have this from the selection process) and that you have enough people and time to test the new service before it goes live.
  • Establish formal completion criteria at the start of the project and assign sign-off responsibility to a senior business user.

Now you are transitioned. In the last part in the series I will discuss on-going management and realisation of benefits!

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