Outsourcing technology, especially software, isnít just for the little guys
any more. With the downturn in the economy, firms of all sizes are looking for
outside help in managing their supply chains, particularly the transportation
component. Many are finding that technology service providers can help lower
costs, as well as conserve resources.
For those new to outsourcing technology, the first and most important
challenge will be choosing a partner or provider. Though every firmís needs are
unique, there are some basic criteria that every company seeking an outsourcing
partner should consider. Following are 13 factors to weigh when making this
important choice. Keep in mind that a poor selection will yield a poor result.
Financial stability. Though it might feel awkward to question a
candidate about its financial stability, itís an essential part of the due
diligence. For one thing, you want assurances that the provider will be around
for the long term. For another, if youíre signing a sizable contract, youíll
need to ascertain that the provider has adequate financial resources to
provide the support you require.
Business experience. How much experience does the candidate have in
providing logistics technology services in general? How about in your
particular industry? Finding a partner that already knows something about your
industry shortens the learning curve.
Management depth and strength. When you sign an outsourcing agreement,
youíre not just purchasing a service; presumably youíre also purchasing
expertise. Make it a point to check out the people at the top.
Reputation. Seek out some of the providerís clients and talk to them
about their experience with the company. One question to ask: Does the
provider simply do what itís told or does it constantly seek out ways to
improve its capabilities and service to clients?
Strategic direction. Just as your company should have a business
strategy, so should the technology provider. Surprisingly, many do not Ė and a
large percentage of those that do seem to have a planning horizon of one
afternoon. You might argue that the providerís strategy should be the same as
the clientís, and thatís true to a point. But a well-managed service firm
should have its own goals and objectives as well. It should also have
commitment and direction.
Technology. Thereís no substitute for a careful, in-depth evaluation of
the providerís products and current operations. Assign a qualified person or
team to assess the quality and efficiency of the candidateís technology and
services. Donít accept any excuses here. State-of-the-art technology such as
blade server and storage area network capacity and 24/7 worldwide
accessibility will be critical.
Global Capability. Can the candidate meet all of your global needs
either by itself or through existing alliances? Be careful on this one. Itís
not enough to be able to locate China on the map!
Commitment to continuous improvement. Is the provider committed to
ongoing performance enhancement? Does it have a formal procedure for
Growth potential. If, like most companies, you anticipate growth in
sales volumes, product lines or markets, you need a partner who will be able
to keep up. Make sure the service provider is in a position to support your
Security. The events of Sept. 11, 2001, awoke Americans to the
realization that security is more than a theoretical threat. Today, itís
essential to secure your technology against not only compromise or
interruption, but also against infiltration by strangers. Make sure the
candidate has backup systems and the latest security protection methods.
Chemistry and compatibility. Chemistry isnít just a factor in picking a
spouse. Itís also something to consider when choosing a software partner.
Follow your instincts and heed your intuition. If you have concerns about
personal chemistry and compatibility at the outset, think twice about going
ahead with the deal. The situation is unlikely to improve over time.
Ethics. If weíve learned one thing from Enron and Bernie Madoff, itís
this: You need to be extremely careful about whom you deal with. Ask
candidates about their codes of ethics. Though only the larger providers are
likely to have formal ethics policies, even the smaller players should at
least have some kind of code of ethics for their employees. But keep in mind
that a written policy is no guarantee of ethical conduct. In the words of
Mason Cooley, "Reading about ethics is about as likely to improve oneís
behavior as reading about sports is to make one into an athlete."
Cost. Though price need not necessarily be the least important of your
selection criteria, neither should it be the foremost consideration. The
manager who selects a provider based solely on cost has committed to a
technology strategy that has little chance of success. Ideally, cost should be
a factor only in deciding among candidates that meet all the other criteria.