Vendor Evaluation

How to Select Your Offshore Providers

Most businesses know that in order to outsource successfully, they must know exactly what products and services they are outsourcing, and why, so that they can appropriate allocate their resources to the projects and ensure that they contribute to the business's goals. But occasionally an equally critical component of outsourcing, careful evaluation of offshore providers prior to selection, is overlooked, much to the organizations' detriment.

When choosing an offshore provider, it is important to conduct a thorough search for appropriate overseas vendors, contact those vendors for preliminary information, use that information to create a shorter list of potential vendors, request recommendations from the vendors' previous clients, analyze the vendors' capabilities, request proposals, and then select a single vendor.

Given the vendors' overseas location, the screening and selection process is somewhat different than that used for evaluating contractors closer to home. Here are five guidelines that you should follow in selecting an offshore provider for your software development needs.

  • Location, location, location: Be sure to pay attention to the vendor's location and consider the economic and political environment of the country where it is located. Other issues, such as the adoption of information technology and pirating laws should also be factors in the selection decision. Choose to work with a vendor in a country that has a powerful and fair judicial system in order to minimize your risks in outsourcing. Also, consider whether the use of outsourcing is increasing or decreasing in that country, and investigate the reasons behind that change. Finally, be sure to follow the political trends, especially prior to elections, because the regime in power can have a great impact on the viability of your offshore operations.
  • Know your vendor inside and out: You're going to have a close working relationship with your offshore vendor, so it is important to understand its mission, vision, core competencies, and goals in the short run and in the long run. You are about to enter into a long-term relationship with a vendor, and you want to know whether your potential candidates will be a good fit with your organization. Be sure that you are comfortable interacting with the management and that you have confidence in the leader's ability to run the company and fulfill its promises to you. If there are slight differences between the vendor's business practices and your own, ask the vendor whether it would be willing to make the necessary adaptations for better integration.
  • Conduct a SWOT analysis: You should understand the strengths, weaknesses, opportunities, and threats facing each of the vendors on your short list. Examine each potential vendor's HR policies, staff qualifications, available technology, policies for handling confidential information, quality management, and anything else that touches on your project. Be sure that the vendor is capable of managing crises and has enough resources available to complete your project as promised. If possible, visit the vendor in-person to verify the information you're receiving at this stage.
  • Money talks: Conduct a thorough financial analysis of each vendor's proposal so that you understand all the costs involved to produce and deliver the final custom software project that you're looking for. Consider the vendor's financial position and strategies to understand how risk factors may influence the total cost of the project.
  • Read all the fine print: Once you have identified the vendor you would like to work with, be sure to develop a comprehensive and binding contract for the relationship. At a minimum, the contract must address the scope of work, timelines, a budget, methods and frequency of payment, quality standards, roles and responsibilities, and reporting schedules. A clearly defined service level agreement (SLA) and clauses for confidentiality and termination are other critical elements in any offshore development contract.

Following the five guidelines described above will make it much simpler to evaluate prospective vendors and choose the contractor who is best positioned to meet your company's offshore outsourcing needs.