One rule of thumb might be: Don’t pay attention to anecdotal accounts of how ABC Corporation was able to get the same IT expertise from a $20,000 service-level agreement that it once got from a $100,000 full-time IT employee. Also, don’t fail to account for the human cost of outsourcing: When jobs are cut, morale tends to suffer, and the energy you spend managing the mood at your company might counteract the savings gained from outsourcing.

Recognize outsourcing for what it is: a method for improving efficiency, not a cure-all. “Information technology is a hammer—a tool to do a job,” says Mooney. “You need to ask, ‘What is the case for [outsourcing] in your business? Does it help you do something faster, better, more reliably?’ These are the questions a good partner should ask about your business so he can recommend the right hammer.”

How to choose the right IT service provider

1. Calculate your current expense. Figure out what it’s costing your company to keep IT tasks in house. Do your best to quantify the hard costs of procuring the hardware and software needed to run your business, hiring and training personnel to oversee it all, putting up with downtime, and incurring upgrading expenses.

2. Get feedback. Involve your existing IT staff in the discussion. If turning to an outside service provider is going to mean job cuts, this might not be possible. But people whose jobs are only going to be changed (and not eliminated) can provide valuable input not only about what services and products you need, but how their own jobs could be refocused.

3. Develop an outsourcing strategy. Ask yourself why you’re looking for outside help. To save money? To get IT tasks done more quickly and efficiently? Also, figure out who will manage the service contract and be the lead contact between your company and the service provider.

4. Get references. This might be the most important step of all. Ask your prospective service provider’s clients (as close to the size and focus of your company as possible) why they chose this company, whether they plan to renew their service contracts, and if there have been any problems. Insist on being put in contact with some of the service provider’s former clients, as well.

5. Insist on fail-safes. Ask about compensation for non-performance. If your service provider’s “up time” is all they say it is (and it should be above 95 percent), then they shouldn’t mind compensating you, with either a rebate or service credits, for those rare occasions when things go wrong. Insist on the option to terminate your service contract if non-performance becomes a chronic problem.

6. Keep your options open. You might find that you were better off keeping some functions in house. Many vendors will let you do this without a significant penalty, but that might not be the case if the vendor has purchased hardware or software to run on your behalf. One way around that problem is to lease your hardware and software from one company and have a service provider run and maintain it.

7. Keep on top of it. Once you’ve settled on a service provider, develop a periodic review strategy to track the effectiveness of your IT partnership and the wisdom of renewing your service contract.

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