You’ve taken the decision to outsource and market forces warrant that you contract an external services provider. The looming question now is how to find the right vendor?

The decision is critical as outsourcing relations often translate into de-facto partnerships. If things go wrong, mission critical IT systems, intellectual property, customer operations, and possibly millions of dollars in project reallocation can be at stake. Vyoma Nair, co-founder of Nair & Co., shares tips for choosing the right partner, based on the company’s 15 plus experience in helping companies expand overseas.

Is the service provider(s) financially stable?

A company does not want its provider going out of business halfway through a project. “Check how many years the vendor has been in business, whether it has ever declared a group company bankrupt or put it into receivership. This is especially important if the provider may be handling your money. Question if they have the quality standards you require,” said Vyoma Nair.

If a company is required to abide by standards such as the Statement of Auditing Standards 70 (SAS70) for accounting, then it is advisable for its service provider to be similarly certified. If needed, make it a requirement in the contract that the vendor obtain the certification at its own cost.

How transparent are the operations?

The vendor should be confident of its expertise and processes to allow a client to audit its work on its premises whenever the client wants.

What are the contingency plans?

This is especially important if time-critical jobs are outsourced. For example, if outsourcing contract testing, the vendor needs provisions for situations like failure of backup equipment. If there is staffing or other problems in one office, there should be another office(s) where work can immediately be reallocated.

Are you getting the intangible extras?

Quality service providers do not simply stick to the letter of the contract and offer many extras. For example, an organization with an internal audit department could share the results of the internal audit on the client’s account free of charge. It could offer data easily integrated into the client’s own IT system. Alternatively, if the service provider is experienced in different systems, it could use the client’s systems.