Before outsourcing was mainstream among enterprises, the service provider site visit was an ultimate prerequisite to making a service provider selection. However, a perceived lack of benefit achieved on such trips in the past often means less emphasis on this important part of today’s selection process.
Many executives underestimate the value of performing due diligence site visits. However, onsite due diligence trips, when done the right way and at the right time, play a critical part in the strategic procurement process, unearthing key information that helps organizations select the service provider best suited to their business.
Who Should Go?
This onsite outsourcing service provider visit is not usually a trip for the CIO. Instead, the CIO should send the key IT staff members who are best qualified to evaluate the service provider team, tools, transition plans and solutions. This team should be the ones who will be tasked with making the outsourcing relationship work and who will be engaging with the service provider on a day-to-day basis (‘Evaluators’). Facilitating direct interaction between these two groups before final selection can help identify and anticipate potential issues before they arise.
What Should You Evaluate?
While Evaluators must address a long list of standard due diligence requirements (e.g., dual entry of telecom providers, backup power, physical and virtual security), the leading service provider contenders can often appear on par with one another. Evaluators can help differentiate between service providers as part of the onsite visit by focusing upon the criteria that are critical to a successful outsourcing partnership.
Regardless of the commercial arrangement, the service provider’s specific resources are critical to the success of the service provider’s services and solution delivery. It is important to determine two things: the service provider team members’ ability to collaborate on a plan based upon live feedback and their ability to demonstrate a desire, and moreover the capability, to go beyond a contract to address issues, add value, and deliver a ‘client first’ oriented service.
Service provider tools can appear attractive in RFP responses. However, during due diligence, Evaluators can watch how the service providers actually deploy and use these tools with their other clients. Another way Evaluators can judge the value of tools is to learn if proposed team members have ever used the tools or received training for them; if experienced resources have never used the tool, chances are that the tool is not as critical to delivery as Evaluators may have originally thought.
When Should You Go?
An optimal time for a due diligence site visit is when negotiations are almost complete (assuming negotiations are competitive among multiple service providers). When the deal is within weeks of a start date, the service providers can realistically commit resources and the Evaluators are more likely to meet the bulk of their prospective team. Similarly, a lack of committed team members can be an indicator of service provider resource issues. Timed in this way, due diligence visits can accelerate the resolution of outstanding issues.
Why Should You Go?
If your procurement process is competitive, pricing and essential requirements won’t be sufficient to differentiate the service providers as there is likely to be parity in these categories. Therefore, the potential service provider teams, tools, transition plans and solutions should be the primary criteria that differentiate the top service provider from the rest. The best way to accurately differentiate key selection criteria among service providers requires traveling to their delivery centers. Buyers that conduct a carefully planned onsite visit to the short list of outsourcing service providers that are competing for the business will tell you they can’t imagine having made the right decision without having made the trip. The alternative – not making the investment associated with due diligence – can lead to long term repercussions that far exceed the cost of the trip, even if you assume you would have selected the same service provider.
Steven Kirz is the Managing Director at Pace Harmon.