Moving Houses: How to Make the Most of Transitioning to a New Sourcing Provider

Co-authored by Carol Wright.

As application workloads become more portable and less dependent on a physical location, clients are finding it easier to switch application and infrastructure providers, whether for performance or financial reasons. Of course, strong contract terms regarding termination rights are essential to any deal, but sourcing buyers that are forward-looking and tuned into what’s possible can turn a provider transition into a powerful upgrade of services and strategy.

Indeed, this can be the time – both contractually and technically – to take your IT operations to the next level. Rather than sticking with a delivery model that merely maintains the status quo, consider this as an opportunity to inject your IT organization with as-a-service constructs, DevOps and Agile methodologies, cloud services, automation and other capabilities that help you build a digital backbone.

Here are the Top 5 ways to make the move from one provider to another really count. (Note: It’s no mistake three of the five involve software).

1. Revamp your software licensing. A new service provider means a new service delivery model, and a new service delivery model means a new operating model. Keep in mind that your software license structure also may need to change. Consider shifting your volumes and the ways you deploy and use software into more efficient or transformative solutions. Be sure you understand and resolve any restrictions or risks to current licensing. Though these restrictions may impact your transition business case, the transition can be an opportunity to restructure or replace your current agreements in a way that brings greater value and alignment with your digital roadmap.
2. Know what you have. Consider a software configuration audit to make sure you know what software is in use, whether you own the licenses or the licenses are provided by the incumbent provider. Take time to get the software information in your Configuration Management Database (CMDB) up to snuff. Develop an entitlement report and test your environment to identify and remedy any current compliance issues that could be exacerbated by a switch to a different provider and to determine opportunities to optimize your current deployment across your on-premises and external hosting environments.
3. Think about the big picture. A switch in providers is a key juncture when you can rethink or fully implement a software asset management (SAM) strategy to help control costs and manage the risk of licensing non-compliance. Determine whether you will continue to rely on providers’ software licenses or if you will own all your underlying software. Even if a SAM was a part of the prior infrastructure services, establish a clear picture of your current usage so you can understand the financial and licensing issues prior to switching providers or switching ownership strategy.
4. Redefine ownership. Any big move is a good time to evaluate – and scale back – what you own. Whether you or the incumbent provider owns your underlying hardware, use this occasion to rethink, redisposition or purchase new hardware. It also may be an opportune time to migrate work to cloud platforms, including software-defined storage or WAN, to replace in-house data centers and network hardware.
5. Document before and after. Enterprises should plan on a minimum of a one-year transition period to allow for a ramp down in services and secure a commitment from your current provider for ongoing access to reports, inventory data and traffic without additional fees. Be sure to add some one-time contingency costs to the budget to cover the transition. If you have time before the transition, conduct a benchmark to establish a baseline that can be used as a service-level agreement to measure continuous improvement in the future. Most people think of a benchmark in terms of dollars, but taking the time to measure satisfaction pre-transition can prove invaluable.

A transition introduces both opportunity and exposure – opportunity to take advantage of changes in strategy and technology to deliver new and better services to your company and contractual exposure across components of your IT environment. The key to success in both regards is conducting a detailed analysis and then focus on big-picture thinking that will get where you need to go.

ISG helps companies optimize contract terms, platforms and services during service provider transitions. Contact us to discuss. 

About the authors

Bill is a sourcing industry leader and active proponent of helping to create professional standards and best practices. His areas of expertise include sourcing strategies, shared services and contract negotiations. Throughout his career he has been responsible for both business development and delivery of strategic advisory services in procurement, vendor management and operational transformation.

Carol helps clients think through the financial complexities in today’s outsourcing environment — from business case development to global pricing structure strategy to contract negotiations. Carol supports clients across multiple industries and across many different types of outsourcing contracts, including ITO, ADM and BPO. In original transactions or second generation, multi-provider engagements, Carol advises CIOs and CFOs on how best to balance the needs of cost predictability with operational flexibility.