The Transitions Inside Your Business
Dr. Miriyala and Ms. Hufford proposed that both parties must be able to come up with
a system to identify future risks that have not been identified in the early stages of the outsourcing process. For example, they could try to analyze what business continuity measures each could take in the event that one or even both parties go into bankruptcy.Another scenario that they could use is the possible effect of market changes in the prices of the services being outsourced. In this scenario, each could amend the existing contract in order to make sure each one of them is not negatively impacted or, if it is inevitable, minimize the possible effect on each of their standing. Regular and careful monitoring, as well as scenario simulation could help unearth risks that were not identified before, the paper says. Since it would be almost impossible to identify all risks unless aggressive analysis was done in a lengthy time-frame associated with an outsourcing agreement, it would be best if both parties would be able to continually watch over the existing system and probe it every once in a while to show potential problems in the process.
Suggested methods of doing this are dry runs, in which a possible problem is simulated to check how effective the proposed risk management measures are. Dry runs are also useful in identifying loopholes in the actual implementation of these measures. The new risks and problems within the system are then used in improving the existing emergency actions. These can be done before the mitigation systems are up and running.
Some contracts are erroneously formulated in a way that, when the outsourcing firm takes over, the employees in the former system are automatically out of work. This could pose problems to knowledge and expertise transfer, and to the system itself during the transition.
As a separate approach, the Six Imperatives for the Transition Phase of an Outsourcing Agreement suggests that transition plans should be made with considerations to the human factor. During the transition process, both the client and the supplier should be able to come up with a contingency plan. Before they could do so, they must be able to identify which situations make up a contingency and should be addressed with backup plans that can be invoked when the situations arise.
The situations usually are natural and unavoidable, like natural disasters as well as a dramatic change in the market's landscape that could have a possible negative impact on the arrangement between client and vendor. Because they have a relationship, what happens to one affects the other. Mergers and acquisitions by other outside parties of either client or vendor can have an effect on the existing agreement, which may include termination of the contract. These changes usually occur over the long term and could not be predicted using mainly dry runs and simulations. Contingencies, by definition, are usually out of the contract's scope, but they can be defined broadly in the contract's terminology. The aim is to ensure that both parties will be able to salvage the situation in mutual benefit.
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