Affordable Doesn't Mean Inferior,Why Expensive IT Outsourcing Can Be a Costly Mistake

As a Technology Investments Advisor to Boards and CXOs of Large Companies, I have witnessed numerous instances where business leaders struggle to make objective decisions when selecting IT service providers for outsourcing. Often, when the commercial differences between providers are not significant, subjective factors such as the provider's perceived shine and slightly higher price take precedence over other important considerations like references, site visits, and team quality. Unfortunately, this ‘objectively subjectified’ decision making approach can be a recipe for disaster.

If your organization is contemplating outsourcing, here are five key points you should consider when evaluating the final offers:

1. Skin in the Game: Assess which of the two providers is willing to demonstrate partnership by accepting Service Level Agreements (SLAs), penalties, and performance guarantees that are enforceable. Look for credible deterrents that ensure certainty of performance, particularly for technology towers that require such assurances.
2. SLA driven Commitment to Make the best talent available : It is true that a large provider may bring domain experience to the table, but it is crucial to ensure that the team with that experience will actually be working on your project. Quantity does not necessarily equate to quality. Do you really need 10,000 domain experts on your project. Isn’t is better to outsource to a provider that offers its A talent directly to you, rather than allocating it to other clients.
3. Talent Retention : Top talent will always be in high demand from various clients. However, if a provider is willing to commit to making their top talent available for 18-36 months, it demonstrates their dedication to treating your account with priority and care.
4. Flexibility: Your business will evolve, and so will the people within it. A provider that is keen to establish a partnership will always allow a certain flexibility in the contract to accommodate changes. This could include the ability to change teams mid-project, pause and resume projects at a later stage, or accept late payment of invoices without interest. Such terms demonstrate flexibility and a willingness to work collaboratively.
5. SLA for Executive Presence in Steering Committee : This plays a significant role in establishing trust from both sides. It is important that the individuals who make promises during pre-sales meetings also follow through. If a provider commits to ensuring its top leadership attends quarterly engagement steering committee meetings, it signifies their organization's full dedication to your success.

Technology Outsourcing is akin to purchasing B2B services, which differs greatly from ordering food at a restaurant. The most Instagrammable, aesthetically pleasing, and visually enticing dishes may not always be the healthiest choices. So think carefully before going ahead with the most expensive provider .

The five points mentioned above should help you make an objective decision when evaluating service providers.

If you are currently considering outsourcing or in the process of evaluating potential service providers, please feel free to reach out to me on LinkedIn. I am available to offer further guidance and insights.