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Outsourcing health checks
Rick Simmonds, 1st July 2006
Outsourcing health checks: it’s all about identifying the good as well as the bad, writes Rick Simmonds
Contract health checks aren’t obligatory, but the wiser outsourcing user conducts a health check to ensure that their deal is still meeting the criteria which drove the deal in the first place. No business stands still over the term of a typical outsourcing deal, which can range from 3 to 10 years. In this sort of timescale many businesses look completely different and the corresponding requirement of the outsource deal can change.
All kinds of issues can get surfaced as a result of such a check. Mismatched expectations, misaligned stakeholders, misunderstood strategy… However, it is not just problems that a health check can identify; successful aspects of the relationship can also be identified, thus ensuring that these parts of the deal can be built upon to bring more value to the outsourcing relationship.
So when’s a good time to conduct a health check? It is not uncommon for them to take place around the anniversary of the signing of the deal so that any findings can be included in annual reviews and realignment.
That said, post-transition checks conducted at a time when the service and personnel/transition issues should have stabilised are certainly worthwhile as they can help ensure that the service management and governance arrangements are working and that any surprises have been handled appropriately. In addition, a health check conducted 15-18 months before termination or extension of a contract can aid the decision-making process in choosing whether to competitively re-tender the contract.
If you think it may be time to conduct one, first of all take stock and consider who is best placed to carry out the health check. It needn’t necessarily be a third party, but it should certainly be an independent party which is not involved in the deal as both client and supplier may be perceived as having a vested interest. An external advisor can bring to bear knowledge of best practice and current benchmarks from the market. Both clients and suppliers often find that an independent third-party can help them ‘see the wood for the trees’ – in this respect it is not uncommon for both parties to fund and brief the reviewing organisation.
It’s the nature of the beast that the outsourcing industry is a particularly fast-moving industry and a lot can happen over a typical contract term. So don’t be afraid to ask questions once you have signed on the dotted line.
About the Author
Rick Simmonds is a Partner with Alsbridge plc, the award winning advisors on outsourcing, shared services and offshoring. Rick can be contacted at rick.simmonds@alsbridge.eu or on +44 (0)20 7242 0666.
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