Selecting IT Service Providers: Common Mistakes and How to Avoid Them
The selection of IT service providers is a crucial step in any IT or outsourcing project. This process goes through several phases: after the tender documents are completed, suitable providers are identified and invited to submit proposals. Then, the received offers are negotiated, leading to the selection of the contractor. Unfortunately, mistakes are often made during this selection process, which can significantly impact the quality and success of the project. In this blog post, we highlight the most common mistakes and provide valuable tips on how to avoid them.
Typical Approach to Selection
Many companies do not follow a sufficiently structured approach when selecting IT service providers. Often, the focus is placed on price and a few other criteria, while other important factors such as experience, expertise, infrastructure, and long-term collaboration are neglected. This approach can lead to suboptimal decisions: choosing the “wrong” provider often results in performance issues and difficult cooperation later on.
The 5 Most Common Mistakes
Based on our experience, here are some of the most frequent mistakes companies make when selecting IT service providers:
1. Inadequate Assessment of Technical Expertise
It is essential that the provider has the necessary technical knowledge and experience in the requested service area.
Tips:
- Request specific reference projects from the recent past. Ask for data that allows a realistic assessment of the provider’s experience.
- Ask for contact persons for the reference projects to speak with other clients about the provider’s experience and staff expertise.
- Assess the competence of the provider’s staff through requested short profiles and (where appropriate) certification evidence (e.g., Cisco CCNP, Microsoft MCSE).
- Company certifications (e.g., ISO 9001, ISO 20000, ISO 14001) can ensure a certain level of quality and maturity of the provider’s organization. These certifications should be relevant to the requested services.
- If industry-specific knowledge is required, ask the provider to demonstrate this as well.
2. Insufficient Consideration of Security and Compliance Requirements
Security standards and compliance requirements should always be a priority when selecting IT service providers.
Tips:
- Specify relevant security standards for the requested service and ask the provider to detail how they comply.
- If international standards (e.g., Tier classes for data centers or EN 50600) or certifications (e.g., ISO 27001) exist, ask the provider to prove compliance or possession.
- List compliance requirements individually and have the provider confirm adherence. If necessary, ask for additional measures to ensure compliance.
3. Lack of Flexibility and Scalability
The provider should be able to adapt to changing requirements and grow with your company.
Tips:
- Request the revenue related to the service segment over the past 3 years. This reveals the provider’s competence and the importance of the segment to them.
- In reference projects, ask for details on how changes were handled, especially if changes are critical to the requested service.
- Contact persons for reference projects allow you to discuss the provider’s flexibility and responsiveness to change requests.
- Include provisions in the contract for handling change requests. The contract should be modular to easily incorporate and commission changes.
4. Neglecting “Soft Facts”
When selecting a provider, not only technical and financial aspects should be considered, but also cultural fit and collaboration. This aspect is difficult to specify in a request for proposal.
Tips:
- Choose providers for whom your project is at least as important as it is for you. This ensures a basis for cooperation and flexibility.
- During pre-selection, assess the provider’s culture through their public presence and preliminary discussions.
- Reference project contacts allow you to learn about the provider’s culture and behavior in daily service before awarding the contract.
- Address cultural and behavioral aspects in the contract: define how the provider should interact with you and third-party providers.
5. Time Constraints
Preparing and conducting the tender, as well as internal coordination, require sufficient time. A tight schedule can lead to inadequate documents and poor decisions.
Tips:
- Start with a project plan for the tender and allocate enough time for developing and aligning selection criteria with all internal stakeholders. Also plan sufficient time for evaluating providers and their offers.
- If time becomes tight during the project, speak with your current provider early and negotiate a contract extension. This is easier if they can also participate in the tender and if the scope of services increases compared to the current contract.
General Recommendations for Selecting IT Service Providers
To avoid the above—and other—mistakes, a structured approach is essential. Companies should first define clear selection criteria and integrate them into an evaluation process. Criteria and processes should be tailored to your specific service request.
Once the criteria are defined, they should be weighted to determine their relative importance. This helps ensure a balanced evaluation of providers. A scoring system can be useful for objectively comparing offers and making the best choice.
By following a structured approach and considering the right selection criteria, companies can ensure they choose an IT service provider that is not only cost-effective but also guarantees long-term project quality and success.
