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The 10 Things to Consider When Choosing an Outsourced
Vendor
Patrick Kelly; June 27, 2005
Consideration 8: How Stable is the Vendor?
When you choose to outsource, you should be looking for the
vendor that can solve today’s problem but also be around to help
you next year. You might need a team of three today for a
two-month project; after that, you’ll want one person for
maintenance for six months; and at some point in the future, you
may need to bring a team of four back onsite.
When you consider these long-term needs, it is wise to look at
the stability of the vendor. For example, if the vendor company
is a one-man-shop, you have essentially no stability. Once this
project is over and he has moved on to the next, it could be
impossible to get him back onsite for future work. Lots of
one-man-shops work in consulting only until they can find
employment somewhere, leaving their customers holding the bag.
When considering team-based vendors, you should be mindful of
their financial stability. Many service companies have cash-flow
issues that can impact their customers. The last thing you want
is to have your project slip because the vendor can’t make
payroll. Ask prospective vendors for proof of their financial
stability.
Another aspect of stability is turnover rate. On any given
project, the team members that you work with should rarely
change. Ramping up a new resource costs time and money, so
turnover is very important. When you talk to the vendor’s
references, ask questions about turnover.
A final aspect of stability is abandoned projects. Ask the
prospective vendor about any projects that have ended badly or
that were abandoned. Sometimes they will be forthcoming with
information. If they tell you that it has never happened, do
some research on it when you call their references. You want to
make sure that this vendor doesn’t have a history of walking out
on projects.
Consideration Eight reminds you to think about the stability of
the vendor you select, because you are better off with a
long-term partner.
Consideration 9: Will Your Company Own the
Source Code?
Here’s an interesting story. In 1998, The Vickers Corporation
decided to sell the Rolls-Royce automobile business. Although
Volkswagen Group also made offers for the company, the leading
contender seemed to be BMW, who already supplied engines and
other components for Rolls-Royce and Bentley cars. However, in
the end, Volkswagen won the bid to buy the company, or so they
thought. It turns out that the Vickers Corporation sold
everything to Volkswagen except for the trademark and logo for
Rolls-Royce. This valuable little asset was sold to BMW as a
side deal. Can you say "oops"?
So, Volkswagen got the factories and employees, etc., etc., but
they didn’t have the right to actually sell a car branded as a
"Rolls-Royce". They could build the exact same car; they just
couldn’t put the brand on it. I’m going to bet that the legal
team at Volkswagen got an earful from the CEO, but I don’t know
that for sure.
Like the Rolls-Royce example, I have witnessed many companies
who bought a software solution from a vendor only to find out
that they didn’t own the source code. So, whenever they needed
to make changes or upgrades to the software, they were trapped.
The vendor sold them the initial solution for a low cost, but
then gouged them on the maintenance. They were left with only
two options:
-
Continue to pay excessive rates for maintenance
-
Pay another vendor to write new software from scratch
This is a difficult decision because the costs of starting over
are very high, both in dollars and time. It is not a situation
that you want to find yourself in. Luckily, there is an easy
solution: Discuss the issues of source code and maintenance up
front.
The best situation is for your company to own the source code as
a Work-For-Hire. However, this is not always possible, and, it
is usually more expensive. If you can’t own the source code
outright, make sure that your contract with the vendor details
the rates of maintenance and software upgrades.
When dealing with LabVIEWexpert, you can rest assured of two
things:
-
We rarely do projects where our customers don’t own the source
code
-
We have a standard rate policy ensuring that customers don’t pay
higher rates for maintenance than for the initial integration
So, Consideration Nine reminds you to discuss the ownership of
source code with all prospective vendors.
Consideration 10: What is the Vendor’s Overall
Reputation?
A wise man once said, "If you ever sell out your reputation, get
a really good price, because you can only do it once." There are
many vendors out there who have destroyed their reputations by
making bad decisions for short term gain. We are not of that
lot.
At LabVIEWexpert, we make decisions based on how they affect our
long-term reputation. This is evident in our 99%+ customer
satisfaction rating. It is evident when viewing the long list of
testimonials on our website. It is evident by the strong repeat
business that we get from current customers. And, it is evident
by the referral business that we receive. In summary, we have a
great reputation, and we work hard every single day to live up
to it.
When you are managing a high stakes project, one of the best
ways to lower your risk is to find outsourced partners with
great reputations. These can be found through referrals,
checking references, web searches, etc. The key point is that
every vendor’s reputation can be assessed, and this assessment
should be an important consideration in your selection.
A Final Word
When choosing to outsource, there are many things to consider.
We hope that this list of ten considerations has been
informative.
As a final summary before ending the article, let us review each
of the ten.
Consideration 1: Understanding the Power of Team
Consideration 2: What is the Vendor’s Core Competency?
Consideration 3: Do You Know the Total Cost?
Consideration 4: Are You Really Hiring Experts?
Consideration 5: Does the Vendor Have Sufficient Project
Management Experience?
Consideration 6: How Does the Vendor Ensure Scalability?
Consideration 7: Can the Vendor Commit to a Schedule?
Consideration 8: How Stable is the Vendor?
Consideration 9: Will Your Company Own the Source Code?
Consideration 10: What is the Vendor’s Overall Reputation?
When you find a vendor that successfully meets all ten of these
criteria, you can have confidence going forward with the
project. You have done more research than is typically done, and
you have greatly increased your chance of success.
Congratulations.
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