How to choose an outsourcing vendor

HEADNOTE

Most companies outsource at least part of their operations. The question no longer is: Should we outsource?

It's: Who should we choose as our outsourcing vendor?

Outsoourcing isn't new. Accounting

departments have been outsourcing the preparation of their year-end financials, pension plan management and payroll services for years. And some larger organizations outsource other functions such as the cleaning and maintenance of their physical plant and landscape services. Outsourcing is widely accepted as a necessary tool that makes businesses run better.

There are many benefits to outsourcing. These include:

Better cost control.

Improved efficiency.

More time to focus on your core competencies.

Diminished administrative burdens.

No healthcare worries.

Reduced personnel management.

A decrease in the number of non-revenue-producing staff.

On-going vendor proactivity.

Technological advancements.

Outsourcing Support Services

Many firms are now outsourcing their office support services (mailroom, supply, reception, conference/hospitality and telecom management). While the advantages can be great, you must choose the right vendor if you want to achieve the greatest benefits.

To do this effectively you must establish standards and design a set of criteria that candidates must meet. There are nine absolutes to consider:

1. Experience. There are two types of vendors: those that have provided the service you require for a while, and those that haven't provided the service for as long. If the service is old hat to the vendor, ask how successful they've been. Talk to their past and present customers. Find out how much time and capital they've invested to keep this area of their business strong. Ask the vendor's clients about their ability to adapt to changing needs and technology. Remember that longevity doesn't necessarily equal quality. If service is second nature for the vendor, ensure that they haven't fallen behind the times. If it's a new offering, or you've selected a vendor who's just started up, make sure they have the resources, technology and solutions you need. If you're asking them to add a new service, examine the success rate of their other services to determine their ability to grow and expand their capabilities.

2. Quality control. Ask the vendor how they ensure quality? Like longevity, experience doesn't automatically equal quality. Look at their customer roster and ask how long each customer has been a client. More importantly, ask the vendor what percentage of their customers renew their contracts. Repeat business and customer longevity say a great deal about the quality of services that the vendor offers.

3. Resources. Does the vendor have access to the most advanced equipment? Many organizations fail to realize that document management system maintenance is highly specialized. Technological advancements are no longer limited to a server or PC. Office system products are advancing just as quickly as the rest of the business world. Make sure your vendor uses only the best products available.

4. Cost-reduction. Can they guarantee it? They should. A decision to outsource is made for two reasons: to bring greater value to a function, and to reduce costs. Ask how they'll contain costs. Your vendor should provide a detailed analysis of how the cost-reduction will be accomplished. Find out if you'll incur any additional costs.

5. Shared risk. One of the great benefits of outsourcing is handing over accountability and a share of your liability to the vendor. Once you know how much risk the vendor is prepared to assume, determine if this meets your expectations.

6. Staffing. Is the vendor flexible and consistent? Successful vendors ensure that their on-site force is never understaffed, regardless of tardiness, illness or termination. The vendor should be able to replace an on-site staff member immediately without any additional training. Wellmanaged vendors train their other employees in your operations and systems in case somebody at your site needs to be replaced.

7. Reduced overhead. How will the vendor accomplish this? Reducing non-revenue overhead should be a result of effective outsourcing. Find out if your vendor will bring your current support employees onto their team. This is important because many firms don't want to make their existing employees redundant. While most vendors will work hard to hire your existing personnel, this depends on their initial evaluation of your firm and the productivity level of your current staff.

8. Culture. Does the vendor's corporate culture complement yours? This is often a relationship breaker. Many vendors have the experience, quality and resources to meet your needs, but not all of them share the same business philosophies, practices and ideals that you do. Don't underestimate the importance of this. Time and time again, companies hire a vendor and are later forced to dissolve the relationship because the partnership just didn't fit. When you choose a vendor you choose a partner. This fit sustains the partnership.

9. What they won't do. What a vendor won't do is sometimes what matters most. After you've seen and heard their services and guarantees, ask: What won't you do? The answer should be: Nothing. This answer reveals their determination, drive, flexibility and character. Evaluate their response with great care - it can predict the future of the relationship. A good vendor should be willing to do anything that improves your business.

An outsourcing vendor should devote their resources to the most efficient, cost-effective operation of your office support services, allowing you to concentrate on your core competencies. By measuring each vendor against these criteria, you'll discover which vendor will make your business run better, and that's what outsourcing is all about.

AUTHOR_AFFILIATION

Mitch Weiner is president of Archer Management Services (212-502-2100/ www.arhermgt.com).