Seven outsourcing criteria for service provider evaluation

What are the essential outsourcing criteria to be kept in mind to check if your outsourcing partner fits the bill? We explore the critical aspects.

As a function of an organization, outsourcing has many facets. It improves efficiency as well as brings in involvement of experts (while freeing internal staff to focus on strategy and governance). So what is it that brings an organization to the outstanding threshold? What are the criteria before the CIO while making the outsourcing decision? Let us take a look at some essential outsourcing criteria that could be held as guidelines while choosing the right partner.

1) Background research: The first outsourcing criterion that enjoys top-of-the-mind recall with most CIOs is background check. For this, look at the company's track record of delivery, client list, client references, history with other companies, near-shore versus off-shore distribution of employees on project, compliance with ISO 9001 (or ISO 27001) standards, and the firm's financial position in the market. Additionally, employee satisfaction, though difficult to gauge, is part of the outsourcing criteria that directly affects the quality of project delivery. As Upal Chakraborty, the CIO of DLF Ltd points out, "The quality of a service provider's employees can be checked by interactions with them. You will want to work with a vendor who is suitably placed to commit their resources and time. They should possess the core capabilities to execute your specific requirements. If they claim to be working with a strategic partner, it is highly advisable to research that partner's background as well. Vendor collateral should be taken with a pinch of salt."

2) Statement of work: An important outsourcing criterion, the statement of work serves as a detailed document outlining the goals and expectations from your outsourcing partner in terms of deliverables—what is expected and what is not. Chakraborty elaborates, "For example, providing a help desk service is not enough. On an average, the waiting time should not be more than two minutes. Uptime cannot be less than 99.99%, and response time on the desktop should not take more than two seconds."  Besides these, factors like project methodology, detailed project description, user flow diagrams, scalability requirements, delivery commitments in terms of phases, payment schedules, performance benchmarking, and post-delivery support are also vital outsourcing criteria in successful project delivery.

The vendor's delivery record and performance in pilot will play a part in the decision making. A mini task that resembles the main should be handed over
Sesanka Pemmaraju
IT director and CISOSierra Atlantic

3) Pilot testing: A pilot mode should be conducted for every project that allows for it; this is a crucial criterion before you make the final outsourcing decision. Pilot testing especially helps in cases when a project is either complicated, or if you are not sure about the vendor's capability to deliver. "There should be very strict timelines for the proof-of-concept (PoC). The vendor's delivery record and performance in pilot will play a part in the decision making. A mini task that resembles the main should be handed over," says Sesanka Pemmaraju, the IT director and CISO of Sierra Atlantic.

4) Consultation and support: Contractual and operational support should also be clearly defined in the contract. This criterion makes the outsourcing decision convincing. Irfan Mohammed, the vice president of IT at Sourcebits LLC, says, "The client should ensure that the vendor provides at least one to three months of support for bug fixing. Consulting services post the delivery also serves as an important criterion in the outsourcing decision. Generally, maintenance contracts do take care of many of these requirements."

Stringent penalty clauses to counter insufficient support depend on the outsourcing deal's size. This is dependent on the business volume given to the outsourcing partner vis-a-vis the risk that is carried by outsourcing your functions to that company. The penalty clause will be calculated on the basis of this evaluation.

5) Integration: While the above outsourcing criteria talk about work deliverables and projects, this aspect deals with the people integration angle. Initial meetings between engineers on both sides of the project and frequent sync can highly reduce the transition time. A senior engineer and an architect from the off-shore vendor traveling to the client site during the design phase ensure a clear project understanding. Involvement of a technical architect right from the design phase brings a sense of ownership, and ensures better delivery. Regular meetings are always important during this phase, as is transparent communication through the project mailing list. With a 'Staff Augmentation' kind of contract, integration is already taken care of by default.

The line of work that demarcates roles of the partner and the in-house team should be clearly defined. Once critical data comes into the picture, the in-house team should take control. Configuration management systems should be in place to mitigate discrepancies in such situations. Keep the structure so that the outsourcing partner's team pushes the work remotely to the company in such a way that it will be picked up smoothly by the in-house team. The integration criterion actually moves the wheels of the outsourcing contract, and should not be overlooked while closing the deal.

6) Reviews: According to Mohammed, many projects follow what is known as an 'Agile and Scrum methodology'. So insights into the methodology followed by a vendor can give you an idea of their maturity in terms of delivery. A discussion about bug tracking tools, project management tools and client communication tools being used by the vendor can be good indicators of the strength of an outsourcing partner's processes. The outcome of such discussions and reviews can be an important criterion in guiding the outsourcing decision. Pemmaraju recommends, "Your organization can engage a vendor manager who follows all the partners and keep track of their progress on a regular basis. He would also extend the support required from the company's end (training the end-users) and translate the same to the vendor. From the outsourcee end, they would have a project manager, who would play the co-ordinator role between these two parties". The vendor manager would also co-ordinate with this project manager, and they would be the two end points of contact. Regular quarterly business reports (QBR) and reviews can also help.

7) Architectural requirements: The contract should, wherever possible, clearly indicate scalability of the application. Nailing down this outsourcing criterion during the initial negotiation will put in place the infrastructure for a better architecture design of the project. Infrastructure should be compliant with the standards, and also certified from a reputable body. It should demonstrate the outsourcee's information security strength. The service provider should provide real-time reports in terms of the layers of security deployed by them within their infrastructure. As Pemmaraju insists, a personal visit is a must.

Your service provider's core values are a valuable criterion for outsourcing, along with the protection it supplies to the organization's IT functions. Since changing a partner after making a commitment is undesirable, making an informed choice from the very beginning is always the smart move.

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