IT offshoring: Examine the exit on your way in

Arriving in the wake of the Open Public Services white paper, the Cabinet Office offshoring guidance is a clear indicator that government departments will be sending more and more ICT offshore. The section Annex B – Offshoring and UK jobs is so loaded with pro-offshoring facts and figures, it could be aptly entitled Offshoring Objection Handling Crib Sheet.

The paper seems to signal a change in attitude to government departments offshoring. Much of it points to existing clauses and advice; the data handling clauses it references were published by the Office of Government Commerce in 2008. These clauses – concerning security requirements, protection of personal data, confidentiality and staff vetting, amongst other things – now come with a mandatory requirement to “consider” them.

It would certainly be foolhardy to enter into any IT offshoring contract without them, at home or abroad, and the National Outsourcing Association (NOA) welcomes the standardised use of these crucial clauses. It is good to see government departments catching up with best practice, although there are some areas in which I feel the report doesn’t go far enough.

One is exit – one of the most important elements of any outsourcing contract. It’s so important that you must plan for it right at the beginning of the relationshi, but the Cabinet Office guidance treats exit like the afterthought it should never be.

Its singular acknowledgement is: “Exit strategy – This would cover how responsibility for offshored services could be resumed in the event of any contract termination including knowledge transfer.” Yet a robust exit strategy is so much more than that.

Designing a detailed exit strategy is not always possible at the contract signing stage. But before you sign, the agreement needs to include covenants to regularly test and update exit clauses throughout the outsourcing life cycle. This will carve out a path to the complete exodus plan, which will include provisions for replacing supplier-owned technology, secure transfer of intellectual property and avoiding supplier lock-in, keeping your options open on a re-tender. It should all be incentivised, to ensure the supplier’s compliance.

The complete plan must include a fastidious understanding of the true costs of transfer. All too often, exit doesn’t get the attention it deserves until it is on the horizon – when it’s too late, and you are boxed into a corner, encircled by exit charges. That’s when costs can skyrocket.

Also, beware of contracts stating ‘no additional costs on exit’ – these regularly lead to suppliers under-servicing at the contract’s end, incurring inadvertent costs.

If offshoring is to be a part of the government’s austerity plan – and done astutely, it can slash costs at no detriment to service quality – it needs to get the exit plan right.


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