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Key questions to ask before you select IT outsourcing vendor

Key questions to ask before you select IT outsourcing vendor

IT outsourcing space is crowded with a number of vendors. It is hard to differentiate between the vendors, because they have similar offerings and similar rate structure.

How to choose the right outsourcing vendor is a big question. Though ‘it depends’ is the best answer, it is best to open the hood and get into the details.

Vendor comes up with an impressive list of key customers. Can your company become a key customer for this vendor?

For IT outsourcing companies, bigger customers are their critical accounts. Top five or ten customers enjoy better relationships with the vendor.

Being a key customer has its own advantages. They get a lot of attention internally within the vendor organization. Better people manage delivery for these accounts.

Take-away:  It is better to look for a vendor who treats you as a key customer.  

Is your company looking to build a team of leading edge technology geeks?

When your company is looking to build a product or a service with leading edge technology, you are looking for a vendor who has a good team of problem solvers. However, such people are always in short supply. Getting a good team may be a challenge due to the nature of rapid advances in the technology.

Let’s see why.

Some outsourcing companies take pride in working on leading edge technologies. Their USP is in offering leading edge technical solutions. They offer expert teams on iOS, LAMP as well as C# and .net. Their promoters are technology geeks and their key people take pride in their technical superiority.

Since the definition of leading edge changes every two years, it better to check the available team size. It is difficult to maintain good team in diverse technical areas.

For example, delivery team may not have expertise in RFID, Big Data and Cloud at the same time.

Size ofthe technology practice indicates degree of maturity of the vendor in that technology. A few other indicators include white papers published, in-house technology accelerators built and quality of leadership.

Take-away: Prepare a checklist of technologies your company is looking for and verify that there is enough headcount with the outsourcing vendor.

Does your vendor specialize in your domain?

Vendorswith focus on your business domain are easier to deal with because they talkyour language.

For example, if you are a consulting company with a very small internal IT setup, a vendor with strong domain knowledge is a good choice. They understand your business challenges better than pure play technology focus companies.

It eases your burden of managing the vendor relationship.

Take-away:Prefer a vendor who understands your domain very well.


Can you leverage on vendor’s multiple delivery centers?

Quick ramp-ups are possible by tapping into developer pool across different centers. Whena vendor delivers from multiple delivery centers, you need to check management capabilities of the vendor.

Such delivery requires program management skills and excellent understanding of culture of remote teams.  Multiple delivery locations add complexity of coordination, so it requires good process infrastructure to manage the project.

Process infrastructure includes network based tools for project management, teleconferencing facilities and dashboards for reporting.

Take-away:Plan to begin small from one delivery center.


Would your vendor interface with other offshore vendors?

Testing teams and development teams work in tandem with each other. Developers ask questions to testers and get clarifications from them. It removes unnecessary delays in the fixing the defects and delivering features.

However, independent testing vendors are required for performance and integration testing.

With multiple vendors in the program, coordination gets more complex. Not only that,it delays decisions by up to 12 hours depending on the geographical location of vendors.

Check if your vendor is ready to coordinate with other vendors. Many vendors are willing to do that.

It is very important to decide as to what would be resolved directly amongst the vendors and which type of complex issues would be escalated in a triage meeting.

Take-away:It is always better to go with a vendor who is willing to establish working relationships with other vendors.


What do the attrition numbers tell you? Well, lower attrition is better, but..

Rate of attrition is an indicator of employee satisfaction. When employees are not happy, they leave the organization, pushing up the attrition numbers.

Lower the attrition, better it is for the vendor and the customer.

It is interesting to know how the attrition number is calculated. It is not a simple calculation of number of employees left to total headcount.

There are a number of exceptions made while calculating this ratio.

For example, some companies do not include trainees leaving the company in the calculation. Some do not include employees who left within one or two months of joining. Many companies do not include involuntary attrition numbers in the count.

The rules are not uniform across the companies, which makes the comparison a difficult task.

Consolidated attrition ratio is an average across locations. Attrition numbers are aggregated over different locations. Attrition may not be uniform across locations.

Attrition ratio is a quantitative parameter. Attrition number does not indicate experience levels, technical expertise of the people left or number of years they spent with the company.

When trained employees leave, they take accumulated knowledge with them.

It isbest to list down your needs in terms of technical expertise, years of experience and domain specialization.

It may be hard for vendors to provide the attrition data for a specific employee segment, but vendors willing to provide that data should make it to your shortlist.

Take-away:Attrition data is not the sole indicator for comparing vendors.

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