Due Diligence for IT Outsourcing Services
When choosing a supplier, doing your due diligence can mean the difference between making a good or bad decision.
This article mainly relates to comparing IT Service Providers but Due Diligence and the points below can be applied to any industry where a service is going to be outsourced.
What is Due Diligence?
According to the Oxford Dictionary, Due Diligence is a comprehensive appraisal of a business, undertaken by a prospective buyer, especially to establish its assets and liabilities and to evaluate its commercial potential.
In today’s business world it can mean asking a set of questions to determine if a vendor or supplier is right for the job and to assess any risks accurately.
Why is Due Diligence important?
Carrying out Due Diligence checks on a company who you wish to partner with is important because it can highlight the strategic requirements of an organization, that you might not think of initially.
If you don’t have a Due Diligence list, then decision making can become tied to the emotions of those involved based on what they already know or want. If you are overly reliant on one type of method for choosing a company then the results of your decision will be biased and may not make the most commercial sense.
How do you carry out a Due Diligence check?
After establishing a list of providers or vendors who you wish to approach, it is good to go in armed with a Due Diligence questionnaire. The questions will form the basis of what you are looking for and what you expect from your provider, it will also help to ascertain if they meet certain criteria and how they meet it.
Having a checklist in place ensures you don’t miss out details about the important and fundamental principles of a business which could prove disastrous if issues materialize later down the line.
What questions should you ask?
Reputation – Are there any conflicts or problems? Will the Service Provider’s culture fit with the company’s or clients?
History – How long have they been in business? Have there been any unusual peaks or valleys? Has the vendor been in any significant/relevant disputes or litigation?
Partners – Does the Service Provider typically partner with another entity to provide certain services? If so, who? What is the relationship with the partner?
Professional Certifications – Does the provider have any industry certifications? Do they follow industry guidelines and principles? This point is often overlooked if the Provider you are engaging with doesn’t mention it. Most industries will have certifications and standards that good providers adhere to – ensure you do your research to find the best provider for the long term.
What you go in with is what you get out of it in the end. If you have the Due Diligence questions to ask your provider from the start then you can filter out those that aren’t right for your business and move forward with companies that align to your organizations goals, values and strategies.