Spin-offs and other newborn corporate entities often enter the world with the security blanket of a Transition Services Agreement (TSA) – a promise by the ex-parent to take care of administrative things like IT, payroll, billing, and HR as the new entity learns how to stand on its own two feet and/or transitions to the services of its new parent company. These agreements are cast for what appears to the parties to be a reasonable amount time – whatever is deemed required to support the completion of the transition. Commonly they extend from around six months to two years.
Flush with the optimism born of new possibilities, the management teams of most divested companies probably walk out of the TSA contract signing thinking that two years, or a year, or even six months will be more than enough time to wean themselves from the parents' IT and other infrastructure services and establish everything on their own. Underestimation plagues divestiture governance. One thing leads to another, business day follows business day, and, before anyone is fully prepared, the day of full independence comes without time for the systematic, prudent acquisition of a well-established business infrastructure. In the world of IT it is sadly axiomatic that nobody pays sufficient attention to migrating off of legacy technology or services unless the alternative is made to be extremely painful.
How to avoid these problems? The easy and glib answer is to be the ant, not the grasshopper, and walk out of the TSA meeting with a plan for full emancipation in your briefcase. That would be practical advice if there were no other problems to attend to – problems such as running the business, creating a presence for the new entity, and making money. Still, there are things that can be done to make the end of the TSA and the first day of the rest of your life relatively unstressful:
- Be a Whole New You: Make IT and other infrastructure decisions for the new entity independent of previous shared services with the parent. These services may be the best TSA choice, but they should be considered as only one alternative among many.
- You Got to Lead a Duck, Son: Make sure that the organization you're planning the infrastructure for is the one that will exist at the end of the TSA, not the one that exists at the time of the spinoff.
- 30 Days to Rock-Hard Abs: Things don't happen as quickly as you're told they will. Don't underestimate the blood, sweat, tears, toil and time that will be required to do even the simplest things, like setting up a payroll system or integrating a general ledger.
- Be like the Ant: OK, I lied about not giving the glib advice. You do have to be like the ant and start thinking about winter on those first warm spring days.
- Support Our Troops: To make sure the work gets done, you need to give adequate priority, incentives and resources to support the effort. Because transition is not a glamour job, it too often gets treated like an afterthought.
While there may be provisions for extending the term of a TSA, is that really what you want to do? Aside from the potential of financial penalties for continuing to consume resources of the former parent organization beyond the original agreement end date, your service independence is an imperative in your new self-reliant existence. If you can't source a better service delivery alternative than the services provided by the former parent, it begs the question of your viability. Getting crisply off of legacy services requires the same kind of due diligence mindset that drove the spin-off in the first place. Absent that kind of attention to detail, spun-off entities are always in danger of spinning out of control, or worse, wishing they had never moved out of the house.
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