Issues to Consider
In the example above, lets assume a company decides to outsource their online order entry application. When they do, they have two major areas to focus on when evaluating vendors, service levels and vendor management.
This part of vendor evaluation may be difficult because it involves not only evaluating the service levels your vendor says they can deliver, but also examining your own organization to determine what level of service you can support and are willing to pay for.
Our hypothetical company might believe they want to provide 24x7 service with no downtime. That is an achievable standard, but the cost may be prohibitive and the company may not be able to support that level of service if the online application requires the internal order-entry system to be available for data retrieval.
Realistically, this might be a standard that provides for 100% uptime with an exception for scheduled maintenance downtime. The company and the vendor can determine what an acceptable level of maintenance downtime might be. At that point, you can begin to build a partnership that will provide for bonuses or penalties based on deviations from the agreed‑to standard. That way the vendor and the company have equal desire to meet the standard.
One of the most difficult things to do in outsourcing is vendor management. Many times, organizations are outsourcing a headache and simply want to wash their hands of it. Thats exactly the wrong thing to do.
There should always be a company manager who is responsible for oversight of the vendor and the service levels. This manager should view the outsourcing company as an extension of the company staff. Dont fall into the trap of just letting the vendor do his job without the same kind of regular review you would give to an employee.
Mike Scheuerman is a partner at B2B CFO CIO, LLC, a nationwide network of partners that specialize in providing CFO, CIO and senior level executive services to growing companies. Mike has more than 25 years experience in strategic business planning and implementation.