Type “Outsourced IT” into Yahoo!, and you get almost 1 million hits. Make it “Outsourced IT Service Provider,” and you narrow it down to more than 800. That’s still an awful lot of links to sift through, and you may not find the services you need. In addition, there are plenty of fly-by-night outfits that will take your money and then not deliver the goods. So what should you look for in a provider?

Think Business First

Many SMEs focus on the technology or service they need during the selection process. Although this is certainly important, the business side of the equation deserves even more priority, according to Mike Karp, an analyst at Infrastructure Analytics.

“It’s important to remember that choosing a service provider must always be a business and not a technology decision,” says Karp.

Does the provider offer the services you need at a price that is competitive with what it would cost to perform the same functions in-house? Does offloading a particular IT function free up existing resources that could be more effectively applied elsewhere? Does the provider offer an essential service—e-discovery, perhaps, or some other compliance-related service—that would be too expensive to acquire internally? And will the candidate deliver in a manner that is consistent with the company’s own internal rules of governance? Answering these questions will help narrow the field.

Be Specific

A common practice is to develop generic vendor selection guidelines that don’t really get to the heart of the matter. Further, such documents tend to favor the larger “we do it all” giants. Why? Such firms are skilled at marketing their services and gaining approval. However, they sometimes take on work outside of their comfort zones and then develop the talent they need to pull it off. The downside is that you are paying for their learning curve in new areas. The same issue can also crop up with smaller firms trying to play outside of their league.

“Companies should select providers based on their ability to deliver in a specifically defined project and screen providers based on those requirements,” says Michael Friedland, executive vice president of Luxoft (www.luxoft.com).

He also makes the point that real-world experience is gold when it comes to outsourcing, so don’t rely on promises that a company can deliver or responses to generalized guidelines. Look into actual project experience and ask for lists of contacts at clients that received services similar to those being requested. Even if the company hasn’t done the exact work you are demanding, check out their results in related fields and the skill sets on tap to generate success.

Put Rates In The Blender

Friedland cautions SMEs that rate cards can be deceiving. Any price list is merely a declaration, which lists a number of people involved in the project, their seniority, their hourly rates, an estimated number of hours to be billed, and a projected overall budget. However, this is quite different from what could be termed effective or blended rates, which it is best to calculate retroactively.

“Effective rates are calculated at the end of the project, when you can evaluate the scope and what was achieved against the number of people and the rates charged,” says Friedland. “If a provider has experience [and] quality people and knows the job, then blended rates will be lower.”

The achievement of a good blended rate is built on multiple elements, such as hierarchy of delivery team structure, vendor effectiveness, and project overhead costs. So how can you ascertain blended rates for a project that hasn’t taken place yet? The trick is to check with recent clients as to how satisfied they were with the project and how costs worked out compared to the initial budget and projected rates.

The Great Communicator

One heavily undervalued factor is communication, which can make or break almost any outsourcing engagement. The outsourcer has to maintain good communication with the customer, must be able to listen, and must also quickly understand needs.

Further, don’t make the mistake of evaluating the communication skills based on the initial contact. The first person you work with might be wonderful to deal with, but once the project is off and running, you might never see or hear from that person again. Therefore, insist that those who will manage and carry out the project work are part of the initial discussions.