Transition Services Agreements (TSA) Setup

Core Objectives

• Define only those services essential for Day 1 stability.
• Establish service-level standards, pricing, and exit timelines.
• Align ownership and governance to drive timely phase-out.

Seven-Step TSA Setup Process

1. Service Identification
   1.1 Review Day 1 scope charter and critical-systems checklist.
   1.2 List parent-provided activities still required—IT hosting, payroll processing, certain finance services, specialized compliance tasks.
   1.3 Assign a business and technical owner for each service.
2. Scope Definition
   2.1 Describe deliverables in plain language.
   2.2 State operating hours, volumes, and geographic coverage.
   2.3 Note any data-privacy or regulatory constraints.
3. Service-Level Standards
   3.1 Uptime, response, and resolution targets for IT and customer-facing services.
   3.2 Cut-off times for payroll, AP runs, and financial close.
   3.3 Penalties or credits for breaches.
4. Pricing Model
   4.1 Cost-plus, unit-rate, or fixed-fee structure.
   4.2 Include true-up mechanics for volume swings.
   4.3 Separate one-time setup charges from recurring fees.
5. Duration and Exit Criteria
   5.1 State hard end dates; shorter is better to avoid dependency creep.
   5.2 Define exit readiness checklist for each service.
   5.3 Require written 30-day notice before extension; Steering Committee approval mandatory.
6. Governance and Reporting
   6.1 Monthly TSA Review Board co-chaired by carve-out COO and parent Service Lead.
   6.2 Standard dashboard: performance metrics, incidents, spend vs. budget, exit progress.
   6.3 Issue-escalation ladder—service owner, TSA Lead, Steering Committee.
7. Implementation Readiness
   7.1 Configure billing codes and invoice templates.
   7.2 Grant secure network access and segregated data paths.
   7.3 Run Day 0 rehearsal to confirm connectivity, permissions, and reporting.

Deliverables Checklist

• TSA master agreement with schedules for each service.
• SLA sheet listing metrics, targets, and reporting cadence.
• Pricing workbook and true-up procedure.
• Exit-readiness checklist and timeline.
• TSA governance charter and monthly dashboard template.

Common Pitfalls

• Over-scoping TSAs, locking the carve-out into parent systems longer than necessary.
• Vague service descriptions that trigger scope creep and billing disputes.
• Missing data-privacy clauses, risking regulatory fines when sharing personal data.
• Forgetting dual-running costs during exit period—budget overruns follow.
• Allowing indefinite extensions without executive approval, delaying full independence.

Well-structured TSAs keep Day 1 smooth while maintaining pressure to build permanent capabilities and achieve complete separation on schedule.