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Rule 3: Manage Your Providers

Successful outsourcing experiences are those where the service providers are adequately managed by the clients. By management, we mean providing adequate and timely feedback when things don't seem to be right, making use of their entire support hierarchy when necessary, and keeping them apprised of future changes that you might have.

Bad outsourcing experiences are most often the ones where the client thinks that they should leave it all to their service provider.

An important tip here is to keep a file of documented communications between your company and your service provider, especially if these conversations affect the service terms and conditions, pertain to problems and solutions, or involve technical changes to the outsourced service.

When choosing a service provider, here are a few of the most important concerns or requirements that require further research into the outsourcing company:

  • Can they scale? Your outsource provider might be able to serve your current needs, but you should also determine that they can handle growth in your user base, volume of transactions, or storage capacity, as well as other concerns related to general growth in your business operations.

  • Will they survive? With the downturn in the IT industry came a deluge of companies closing shop—a good number of them application service providers or outsource providers. You need to know that your service provider will continue to be financially stable. This doesn't mean that you should necessarily choose the bigger companies, as experience has shown that they're not immune to financial collapse. Remember the old saying: "The bigger they are, the harder they fall." To assess the financial soundness of your provider, look at how they price their services versus the infrastructure costs that they obviously incur. (This is no easy task.) Are they offering their services at prices that are too cheap, compared to their competitors? Are they spending too much on their infrastructure vis-à-vis their client base? Do they have a history of retrenching people or of selling out their assets? Obviously, there is no sure-fire way to assess a company's long-term stability.

  • Will other services be available in the future? Remember that a critical success factor in outsourcing is managing your providers. Naturally, it's harder to manage many different providers than just one. Thus, it's better if you have just one service provider who can handle your many requirements now and in the future.

  • What is their support policy? This is one of the most critical evaluation criteria, as this will determine the long-term stability of your outsourced services. During the proposal stages, ask the potential provider about support policies and procedures. Everyone will tell you that they have this customer support number available all the time, or this email address that you can use to reach them, or may even assign a dedicated account manager to look after you. But ask this: "Do you have a documented procedure for handling customer problems? Where is it? Are there set targets for responding to customer problems?" And last but not the least—which I have seen is an accurate indicator of how mature and serious the support organization is—"Do you have an escalation procedure that goes all the way to top-level management when customer problems are not resolved in a timely manner? What are their contact numbers?"

Obviously, this article doesn't address the technical evaluation criteria, of which you're undoubtedly aware, and which depends largely on what you're outsourcing. I've focused on items that are often ignored but that can cause significant problems to you in the future.

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