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Questions to ASK BEFORE YOU OUTSOURCE
Outsourcing Questions to Ask
ASK BEFORE YOU OUTSOURCE:
Ten Critical Questions to Put to Potential Service Providers
"We need to focus on our core business. "
"We should dedicate IT to strategic projects, not systems maintenance. "
Sound familiar? Widespread sentiments like these are driving an upward trend in IT outsourcing, and redefining what was once primarily a cost-cutting measure into a cornerstone of business success. Indeed, IT advisory firm Meta Group estimates that 80% of companies plan to outsource some IT function by 2003. "Outsourcing is a competitive necessity in the era of e-business," says Dean Davidson, Meta vice president of service management strategies.
As outsourcing becomes both more pervasive and mission-critical, the burning question is no longer "should I outsource?" but rather "what should I outsource, and to whom?" Yet 70 percent of IT managers, according to Meta Group, lack experience in making outsourcing decisions.
"To whom" poses a particular challenge: whereas the lowest cost provider may have been a justifiable (though not necessarily judicious) choice in the past, lunging for the low-ball player spells disaster when vital operations are at stake. Instead, savvy organizations recognize that taking care to select the right outsourcing partners is key to maximizing the effectiveness and value of these relationships.
Companies must therefore carefully assess the offerings, experience and demonstrated capabilities of potential providers. "Don't assume a vendor can deliver 7x24 uptime or anything else just because it claims it can," warns Davidson. "Organizations should make sure providers prove they have the requisite skills." In this spirit, here are ten crucial questions that you must ask-and your prospective provider must answer upfront. Ignore them at your peril!
1. Does the provider have a track record of service commitment?
Outsourcers are called service providers for a reason. Service to you, the customer is the single most important basis upon which to evaluate a potential provider. To understand the full story of a provider's service commitment, examine its service track record from multiple perspectives. Has the provider been recognized within its industry for excellent customer service? Does the provider track customer satisfaction with respect to service levels? What does it do with this data? Has customer satisfaction followed an upward trajectory? How do existing customers themselves characterize the provider's dedication to service? (Ask them!) What access will you have to help desk support? Perhaps most critically, does the provider "put its money where its mouth is" and offer service level agreements (SLAB) backed by financial guarantees? SLAB should cover customer service standards (e.g., time-to response, problem/issue notification windows) as well as the more familiar operational metrics such as network availability and reliability. Find out too whether the provider is willing to negotiate the terms of the SLA (including financial penalties or rewards) to meet your service requirements.
2. How will your account be managed?
Effectively service in action, account management is a critical dimension of the outsourcing relationship. Establish whether the provider has a clearly defined account management plan. Will a designated individual handle the day-to-day details of your account? How frequently will you need to interact with him/her? How quickly can you expect to receive a return phone call from your day-to-day account manager (per the provider's SLA)? Is it possible to meet with your future account manager and other support staff before the relationship is underway?
3. Who are the provider's existing customers, and how satisfied are they?
Talking candidly with a cross-section of the provider's existing and former customers must be the centerpiece of your due diligence efforts. Prospective providers should furnish you with a representative sampling of their customer base or-better yet their entire customer list. You should speak to at least five customers with a needs and/or industry profile similar to yours. Strive to elicit detailed and honest feedback in response to the following questions (and any others relevant to your particular situation and concerns). How long has customer "X" been with the provider? Why did "X" choose it over other vendors? How satisfied has "X" been with the provider's service levels and systems management expertise? Have there been any problems? If so, what types of problems has "X" encountered and how have they been resolved? How would "X" characterize the provider's strengths and weaknesses? Regarding former customers, ask why they changed providers or if they decided to bring the function in-house, why?
4. What is the quality of the provider's infrastructure and of the personnel charged with managing it?
While it is probably true that top service providers are converging on infrastructure parity, it's still essential to check out your prospective provider's infrastructure. Who are its technology component partners and Internet backbone provider? Is the overall network environment quality world-class? What are the key metrics, including reliability, availability and scalability? An on-site visit is virtually mandatory in establishing your confidence in both the provider's physical infrastructure and its management expertise. Meet with personnel who manage and maintain the provider's data centers. Find out their length of experience and tenure with the provider. Check out the provider's quality assurance processes, procedures, and methodologies. Ask the provider to review them with you. Finally, don't neglect to ask the provider about its current and planned infrastructure investments. You want to ensure that you will benefit from continual upgrades and new technologies.
5. What security measures does the provider have in place?
Security is naturally a major concern when sensitive customer data and proprietary business process information is at stake. You should gain a detailed understanding of the security measures that protect a provider's facility from outside intrusion. What firewall and related programs does the provider use, and how do these measure up? Does the provider itself outsource aspects of its security protection and/or monitoring? To whom? Have there been any security problems? (Press the provider on this issue and verify by talking with customers.) What alert and recovery plans are in place in the case of a security breach? Also, don't ignore the potential threat posed by internal security violations. Your best defense here is ensuring that the provider's data center is staffed with highly qualified, experienced and committed personnel (per question number four).
6. Does the provider offer a migration plan?
The hand-over or migration of operational responsibility and data from your in-house facility to a provider's center is typically the first test of an outsourcing relationship. Well before you face that challenge, however, you need to determine whether a would-be provider has developed a methodology to govern migration. Familiarize yourself with the methodology's details to verify that it outlines a process with which you are comfortable. Can the migration plan be modified to meet your needs and concerns? Will a provider work with your in-house staff and even overlap operations temporarily to ensure a smooth transition? Also make certain that the methodology is proven: ask for the provider's migration track record and question customers about their migration experience.
7. How are services priced?
Although service levels, not pricing, should be the key basis for provider differentiation, pricing is undeniably an important element of the value equation. In particular, make sure you know what you're buying. Ferret out and query providers on hidden costs. Is that bottom-line figure comprehensive, or are tape mounts, help desk service and other not-so-incidental incidentals priced separately? You should also get a clear idea of how pricing will change as your needs scale up or down over time. Are your provider's pricing practices flexible or rigidly set? Can you expect pricing breaks or waived fees should a provider miss a service level commitment? As you scrutinize the total pricing picture, remember as well to weigh it against your own total cost of ownership (TCO).
8. What experience and/or special skills does the provider possess?
Beyond mere longevity (itself a key consideration), you should assess the provider's breadth and depth of experience in offering the services you require. Investigate your would-be provider's history. Did the provider evolve into its current service provision space from roots elsewhere, or has it always focused on the type of services it presently offers? Does the provider possess a tightly defined set of competencies, or a wide-ranging array of skills (both have certain advantages, depending on your needs)? Are there any aspects of infrastructure maintenance and management in
which the provider has demonstrated particular strength?
9. How much flexibility does the provider offer in accommodating your specific needs?
This can be tricky to assess. The key is to determine whether a provider is simply trying to "sell you" by over-promising, or whether it is genuinely committed to tailoring its service provision approach to your unique needs. As always, look at the evidence on the table. Has the provider established a pattern of working with existing customers to meet their needs (something to fmd out in customer interviews)? Equally importantly as a measure of sincerity, does the provider demonstrate a willingness to help you clarify and hone your needs and map these onto its service offerings? Keep in mind, though, that you should not expect any service provider to reinvent its business model for you. Be very worried if your prospective provider offers to do so: either they're fooling you or they're not long for this world.
10. How strong is the provider's financial health?
Too often overlooked, the financial health of your provider is critical particularly if the vendor is less than two years old. And if your prospective provider is a brand-new start-up, you should ask to review its cash flow position, burn rate and other financial vitals to mitigate the risk of losing a partner to financial "sudden death." Of course, established providers with a track record of profitability are the safest bet in this regard.
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