exiting and replacement suppliers managing transition risk - clive davies

Exiting and Replacement Suppliers – Managing Transition Risk

Clive Davies

IFCLA June 2010

Copyright 2010 Fujitsu Services Limited

For Fujitsu Eyes Only 2

The Second and Third Generation

For Fujitsu Eyes Only

Passing the Baton

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Themes Winner and Loser

Transition

Transformation

Exit Management

Due Diligence

Transfer of sub contracts and licences

Transfer of People

Transfer of Systems

Critical Success Factors


Winner and Loser


“If you can keep your head when all about you Are losing theirs and blaming it on you; If you can trust yourself when all

men doubt you, But make allowance for their doubting too;

. . . If you can meet with Triumph and Disaster And treat

those two impostors just the same . . . Yours is the Earth and

everything that's in it.”Rudyard Kipling


Transition

Transition is the process by which an outsourcing service is moved from an incumbent supplier to a new service provider

The customer will wish this to happen as smoothly as possible with minimal interruption to its services

It will need to be planned carefully with all the critical activities captured in a transition plan included in the contract with the new supplier

The extent to which the new service provider inherits any commitments such as service levels will need to be negotiated

The new service provider’s lack of familiarity with the services suggest a grace period once it has taken over may be appropriate

The timing of the payment of the service charge to the new service provider should be agreed and linked to acceptance

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Apple II e

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iPad

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Transformation

Transformation is the process by which a new service provider not only takes on an old service but also improves it

It requires a clear understanding of what transformation activities will take place

The contract may contain commitments to savings which give a measurable return to the customer

This will again need to be timetabled and is likely to take place over a longer time frame

Agreeing new service levels and when they replace the inherited ones is a critical factor

An acceptance process coupled with a remedial plan in case of failure should be included in the agreement

One of the biggest challenges is roll out to a number of offices

The service charge will also need to increase proportionately10


Exit Management

The outgoing contract should contain an exit management plan which has been kept up to date

This will specify what the outgoing service provider has to do in order to effect a seamless transfer

It will also set out what charges may be paid for exit – which acts as an effective incentive

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Data Room

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Due Diligence

“The Contractor should be given the opportunity to carry out due diligence prior to the award of contract. Hence, the Authority should not provide any warranties as to the state of affairs at the commencement of the Agreement.”

So what does the Contractor need?

Access to previous contracts

Access to previous suppliers

Knowledge about what the current environment is

And how it can or cannot transfer

Electronic due diligence room provides the answers

But has to be properly populated

Cf. Corporate transactions

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Transfer of Subcontracts and Licences

Outgoing supplier must keep agreement register

Recognise there are different forms of software licences

Third party factor

Form of assignment or novation

Takes time – needs careful management and a joint approach

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•Transfer of People

Acquired Rights Directive

Common themes throughout Europe

Employee rights on transfer of an undertaking

Transfer of service in which employee is wholly or mainly engaged counts

Consultation

Identification and management of contract risk

Should address entry steady state exit

Mutual indemnity regime

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Transfer of Systems

Lift and shift

Swing kit – transfer from old to smaller version in same location

Transfer data from old to new

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Critical Success Factors

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exiting and replacement suppliers managing transition risk - clive davies

Business

joint approachfor fujitsu

newfor fujitsu eyes

old service

fujitsu services limited

service charge

new service levels

outgoing service provider

outsourcing service