… your 10 topics to take care of when comparing offers from IT service providers.
Let’s say you have an upcoming IT project and lack enough resources or knowledge in-house to do it on your own. You decide to give outsourcing, or nearshoring a chance. You may have already sent out a Request for Information (RFI) to a number of IT companies and may have even received some replies. Maybe you’ve already shortlisted suppliers whose responses look promising. What next? The time has come to compare your choices in order to pinpoint the supplier you would like to embark on your project journey with. But how do you choose them correctly?
Cost has traditionally been viewed as a very important – and for many – a deciding factor when it comes to selecting an IT outsourcing supplier. This trend, however, is changing and more and more companies are switching their focus from money alone towards other criteria.
While price is indeed still important, it should never be the sole factor. This is especially true if, rather than go for a purchaser-supplier relationship (where you provide the supplier with a list of tasks and they do the work ‘no questions asked’), you prefer a partnership approach. When talking of partnership, we mean a closer and, typically, a longer relationship, based on mutual trust with a company that supports your business goals, has an ability to transform your processes and systems, and, importantly, is proactive. Such a partner offers advice and opinion, is happy to share knowledge and has the courage to question your ideas with the best interest of your project in mind. So what, beyond cost, should you pay attention to when evaluating outsourcing companies with a view of establishing an IT partnership?
In this article, we explore 10 areas which should be considered if you want to thoroughly assess your potential IT partner and ensure you select the right one. The article in based on a tool designed by Future Processing for comparing and selecting outsourcing partners, following the Request for Information (RFI) or Request for Proposal (RFP) stage.
1. Company overall
When browsing through the responses to your RFI, there are a number of questions concerning the company in general that are worth taking into account.
Apart from looking at some obvious things, like the size of the company, the length of time in operation, its financial stability or its legal/regulatory compliance, try to view the company also as an employer. It is the people that work there that will potentially work for you, so you want to know if they are likely to be happy or frustrated in their jobs. Does the company invest in its workforce through regular training? What is their employee attrition rate? A good team is a pillar for most, if not all, projects and a lack of proper training, together with high attrition rate (which means frequent rotation of staff), may be detrimental to your project, which is why it is worth asking about these details.
Company reputation is another thing worth looking into – and, again, reputation both as a business, and as an employer. While you are very likely to get a rather subjective view on this from the response to RFI, it is good to do some independent research, especially through social media. Facebook, LinkedIn or Twitter can all give you an interesting insight on how the company is received by both its employees and past or current clients.
Let’s explore the topic of an outsourcing company’s employees in more detail. Working with people that only give you their time, not their passion and energy, will not end with the best possible result for your project, so ideally, you would like them to be fully engaged. Engagement is difficult to measure, unless you are already working on a project, or have worked together before. There are, however, some signs at the RFI stage which can be a good indicator of how involved the outsourcing company’s employees may be. These include good reaction time to the RFI, great quality of the output, or early questions, for instance those aimed at clarifying your expectations/requirements, or those concerning your end users. Online reviews and testimonials are often a valuable source of information about the company’s specialists, too.
Engagement can also be understood in the sense of a proactive attitude and the ease of voicing opinions. The more of a partnership model you want, the more proactive and challenging you want the outsourcing company to be. Having the courage to question the solution – with the best interest of the project in mind – is something that can be highly appreciated, because it eliminates the danger of finding problems too late and encourages learning from experts. Again, you will be able to evaluate whether the company has a proactive attitude through their early communications with you and – to some extent – through online reviews.
Technology brings change at such an astonishing speed that the education systems around the world struggle to keep up with the pace to produce enough specialists. As a result, IT roles have become the second most difficult group to recruit for globally (2016-2017 Talent Shortage Survey, Manpower). This shortage of IT talent has caused many companies turn to outsourcing in search for technology skills. It is good to consider the issue of skills holistically: taking into consideration not only programming languages, platforms and specific technologies, but also areas of technical expertise.
As an example, before signing a contract with a nearshoring partner, you may want to check whether their team includes experts in Java, PHP or Microsoft, in desktop, mobile or embedded platforms, in the area of security, cloud or automation, and whether they understand Agile and Scrum.
Having said that, non-technical skills should not be forgotten, especially if you are looking for an IT partnership, rather than a ‘team leasing’ type of outsourcing. Check whether the company in question offers business analysis, project management or UX design services.
Find out about certificates to see if the employees are qualified – enquire about the percentages of people with relevant BSc, MSc and PhD degrees and check for technical certification, e.g. from Microsoft or Java. Finally, when assessing capabilities think about your future needs as well – you would not like to change a provider in a couple of years or so, because of their limited capabilities.
4. Experience and Reliability
In business, just as in real life, it is difficult to trust a complete stranger – you want to make sure the company you consider has enough experience. Look for evidence of similar projects or services delivered successfully in the past. Firstly, you want to make sure they are experienced in languages, technologies and platforms. Secondly, when considering an outsourced team, it is important that they either possess the knowledge of your domain or are, at least, willing and able to gain it. Also, a good sign of experience is if the provider sells their own software products.
Check their website for case studies and testimonials that let you see which sectors they know and work in. Turn to social media for reviews – beyond LinkedIn and Twitter, some companies upload video case studies, testimonials or interviews with clients onto their YouTube channel. Make sure you ask for contact to their current or past clients and give them a call to verify references. This way you will be able to find out if they are reliable, what worked and what didn’t.
Finally, you may want to consider paying them a visit to get a better feel for what kind of company you are dealing with. For practical reasons, it is good to choose companies which are no further than a 2-hour flight from your location and are relatively close to international airports.
The importance of good infrastructure is huge, yet it is often overlooked by companies looking for an IT partner. From the size, quality and modernity of buildings, through such things as the stability of internet and electricity, to adequate software – these factors can all have a massive impact on your cooperation with the partner and, ultimately, on the success of your project. An adequate number of meeting rooms, good video conference hardware and software, well-equipped desks and free parking spaces on-site are all a must. It is also worth investigating whether the company you are considering owns the premises it resides in. It is not difficult to imagine the havoc an end of a rental agreement could cause in your project.
Common ground and understanding are crucial when it comes to making or breaking an outsourcing relationship. When evaluating potential suppliers, it is worth considering a number of factors, all of which affect communication. The most obvious one is, of course, speaking the same language and, in the majority of outsourcing cases, their first language will not be the same as yours. To gain a better understanding of their proficiency, check your language version of the company’s website, read through their materials or book a phone/video call with the prospective partner.
Cultural proximity is another factor that can have a huge impact on communication. As a rule of thumb, for European businesses, other European countries will be closer culturally than, for example, Asian cultures, which diminishes the risk of a larger cultural gap.
Then, there is geographical proximity which, with significant time zone differences, will slow down communication between the teams and, hence, your project.
Finally, it all comes down to personal relationships. It is worth meeting the team you would potentially work with in person to see if you think you would enjoy working together.
The commercials category covers how the IT outsourcing company fits to your organisation in terms of business. It is good to check what cooperation and pricing models are available and whether the provider offers flexibility. Look for companies which are happy to share the risks with you through a contract both parties would be happy with.
For the ease of doing business, it is good to ensure the company has streamlined processes and set procedures, especially those relating to legal and invoicing matters. Flexibility here is also desired to match the way your organisation works, for example to cater to your unique invoicing requirements, or longer payment dates.
When assessing a potential IT partner, don’t forget to enquire about IP policies and copyright. It is especially important to ensure you have adequate ownership of your software in case you ever decide to quit outsourcing or change a supplier.
We have already touched upon the importance of location from a cultural point of view. Apart from this aspect, good location provides practical advantage of quickly being able to address any challenges in person. This is especially true for Europe, where travelling between countries is easy thanks to the density of airports and no visa requirements.
When comparing locations, it is also helpful to look at rankings, such as the Global Services Location Index, which for example, lists Poland as number 1 best country to outsource to in Europe and number 10 in the world. The value of countries in the European Union is also that they have a common standard in terms of legislation.
However, location is important not only on the country level, but also as far as regions are concerned. Apart from choosing a place relatively close to an airport, it is worth considering cities that, with their technical universities and focus on innovation, form a great environment for technology projects to be born and developed.
9. Risk management
Your future IT partner will most likely develop, or manage your IT infrastructure or information assets and they will have access to sensitive and confidential data about you or your customers. Adequate risk management is therefore a must – think about compliance, security and privacy.
It is important to understand the regulatory requirements that your organisation is obliged to meet and see whether providers are able to match them. Beyond looking into their current risk mitigation mechanisms, you can check whether they are able to introduce additional measures you may need, such as additional locks on doors where your outsourced team works. Also consider attaching a Non-Disclosure Agreement (NDA) to your contract.
When exploring the area of risk management, ask about business continuity & contingency plans and find out about security controls in place for data, equipment and physical buildings. It is also worth looking whether the company has ISO certification, such as ISO/IEC 27001:2013 relating to the Information Security Management Systems.
Paying the company a visit in person is also a great opportunity to look at their security procedures first hand.
10. Additional considerations
This area serves as a double purpose. First of all, it is a mixed bag of issues worth considering in addition to those covered above. Secondly, it is about giving you space for thought and deciding what is important for you and your company.
Coming back to the mixed bag of issues – when evaluating software providers, it might be helpful to see whether a pilot project is an option. Giving a task each to a couple of IT companies would provide you with an opportunity to see real examples of their work and get a good feel for how the day-to-day cooperation with them looks like. It is also worth asking yourself a question ‘Can I learn something from them?’. Some traditional enterprises that decide on partnerships with innovative tech companies appreciate their agility and look up to their creative ways of working. And, finally, a less evidence-based question: ‘What is my gut feeling? Do I trust these people?’.
As for the second purpose of this category – here is your space for thought…
It all starts with a good RFI…
I think you’ve got a good overview of some of the factors worth considering when choosing an IT outsourcing provider. The article in based on a tool designed by Future Processing for comparing and selecting outsourcing partners. The tool helps business leaders to make the process of comparison and selection of an outsourcing provider fairer, quicker and more transparent, and helps to formalise the process of choosing such a supplier. It also helps managers present the results of their research in a professional and digestible manner to their bosses and colleagues. The tool is available for free.
Of course, in order to compare your suppliers, it is best to start with a well-thought-out RFI which will gather this information for you. You can download this RFI template, if you need one.
All the best in your projects.
Jarosław Czaja is the founder and CEO of Future Processing (FP), a technology company from Poland, providing software development services to businesses located mostly in Western Europe. While founding Future Processing in 2000, Jarosław Czaja didn’t expect that his company would become an important player in the global software development market. Today, FP is an experienced service provider employing over 800 highly skilled, committed people who are passionate about what they do and relish the challenge of complex and groundbreaking software projects. Heading one of the leading European software outsourcing companies, Jarosław Czaja believes that a qualified and motivated team is the key to success, therefore, a lot of effort has been put into building a successful relationship between the employees and the employer and creating a unique organisational culture.
FutureProcessing is member of Deutscher Outsourcing Verband and among the companies independently recommended for co-operations.