Transition Services Agreement (TSA)-Untangling the Web
Simon Singh, Nikhil Uppal, Jennie Miller · 2013
While planning or executing divestitures, management will understandably concentrate on determining the future-state cost profile and the resulting architectural landscape, and on managing the divestiture timeline and process. However, most organizations do not adequately prepare for the transition period following legal separation to enable a seamless handoff of critical IT and business processes from one organization to the other. This is a costly oversight from both the financial and the operational perspectives; unless the new business is more devoid of complex systems and processes than the legacy business (and this is almost never the case), it stands to disadvantage the new organization as a whole. Thus, we argue that management should take a careful and structured approach to drafting the transition services agreements (TSAs). We provide key considerations and time-tested tips to assist management in approaching the documentation process from the perspectives of both the buyer and the seller. Further, we suggest that management take the time to stand up a parallel governance structure, with monitoring processes, to oversee transition service delivery and exit, thus driving consistent decision making and information flow—and ensuring that both buyer and seller are adhering to stated terms and conditions of the agreements. While many organizations view this as a time-consuming and effort-intensive process, we provide a strategic approach that will make it a straightforward exercise to contemplate and conduct.