Tip 29: Which questions do top client executives ask when initiating outsourcing deals?

‘We have two ears and one mouth so that we can listen twice as much as we speak.’

This is a famous quote by Greek philosopher Epictetus.

Physically, we indeed have greater capacity for listening than for speaking. However, it often feels like the opposite is true. Why do people ask so few questions?

And while we’re at it, why not start asking open-ended questions or even high gain ones?

Epictetus' advice is relevant in an outsourcing context. All too many outsourcing projects are started on the basis of rosy expectations.

When your organization is in the process of outsourcing IT or business process functions, consider asking the following questions:

1.     How will the service provider behave in the event of challenges?

Financial, relationship etc. challenges will occur; 100%.

2.     Similarly, how will my organization behave under such circumstances?

Do we have prior experience with difficulties? How did we resolve those issues? Have we factored in contingency in our deal economics so we can counter head winds?

3.     How will we ensure we maintain adequate room to maneuver?

Think about vendor lock-in, business continuity management.

For example, how is it possible that TSMC has 58% market share in the semiconductor industry (Dec 2023). It’s based in Taiwan that is at risk of being attacked by China. What does that mean for business continuity of so many companies worldwide?

4.     How will the service provider deal with material changes in the event of a changing (economic) environment?

Think of pandemics, geopolitical turmoil. At a more local level think about labor market conditions.

5.     What lies beneath the surface of the sales presentation?

Does the bid team provide solid evidence of prior experience and future commitments? Equally, have we provided the bid team with adequate information based on which they can submit a professional offer*.

* I have managed an outsourcing contract that included a provision on due diligence along the following lines: “service provider declares it has conducted proper due diligence prior to the service commencement date.” The opposite was actually true. The client had not allowed my organization to do DD. It turned out later the client had misrepresented certain scope elements. This had significant impact on the deal economics.

In a next post we will address the questions top executives in service providers ask when considering bidding for an IT or BPS outsourcing project.

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