Getting More Value from Offshore Vendors

CIO — Who do you trust?

That's one of the toughest questions for a CIO to answer when you're designing a road map for large-scale business transformations. You may be integrating a new organization, restructuring the current one, offshoring a portion of your workforce or converting to new technical platforms.

Whatever the project, you know that making the wrong decision could blow millions of dollars in capital investments and quite probably ruin your reputation as an IT leader. But with budget dollars especially limited nowadays, turning to a large management consultancy for strategic help is far less appealing. If you run a typical midsize to large IT organization, you likely have experience working with a mixture of offshore providers. They've invested heavily in higher-level CIO services and are clamoring to be considered as thought leaders.

But how far in the strategic value chain have they really come?

Let's assume you've outsourced some portion of your organization to them already. They know your environment and your people. They've met the mark on services levels and seem to understand your company culture. Increasingly, I find global CIOs who have come to trust their offshore vendors as viable, trusted advisors. But not all of them can offer strategic thought leadership. How do you find the ones who do?

The first step will likely be inside your own peer network, asking around about the vendor's past track record and recent successes. Next, you may want to apply these criteria to determine true strategic capability:

• Assess the vendor's financial command of the business value proposition being discussed. The value proposition should include a detailed forecast of projected savings, efficiencies and/or improvements to business revenue—not just the cost of the deal.

  Find out if their white papers are written by their own practice teams or commissioned by third parties. A lackluster collection of white papers shows a lack of attention to the latest trends.

• Ask to see samples of previous advisory work, which should be completely objective and indifferent to any best-of-breed vendor capable of doing the implementation segment. If your vendor can do the implementation work, that's fine as long as the final report doesn't oversell the follow-on to make them the obvious choice. That's a separate decision altogether.

• Consider your incumbent vendors first, as they may be thinking more strategically than you realize. Vendors already on the inside should be keenly aware of your needs and able to provide provocative points of view about improving your processes, communications or methods.

• If you are looking to delegate program management responsibilities, evaluate how much political and cultural savvy the potential vendor displays. Ask probing questions about managing the politics and communications required to keep all stakeholders, influencers and detractors well informed.

  Finally, be mindful of your preconceived notions about offshore providers. Some CIOs base their decisions on outdated stereotypes of offshore vendors as the bargain-hunter's choice. This is a mistake. Many providers end up squeezed so hard on rates by CIOs in a lowest-price mentality that discussions about that provider's strategic consulting capability never come up.

To find real value for your money these days, consider experimenting with the vendor mix inside your value chain. Shake the tree and see what happens.

Albert Eng advises firms on IT strategy, restructuring, offshoring and turnarounds. He can be reached at albert.eng@ccm-itadvisory.com.