The Value of Credentialing

Organizations intending to source out a project or a task need to understand the value of credentialing a service provider.  Credentialing is analogous to background and reference check, but goes a bit further than just fact-checking.  Credentialing, in fact, serves as an instrument to use to screen and identify the right service provider for the project.  Small to Mid-Sized Businesses (SMBs) seeking to outsource an IT project rarely follow the process used by Tier-1 players.  Tier-1 players either have a preferred list of vendors or use sourcing consultants to identify the best fit service provider.  While this process usually adds value, it is expensive and time-consuming.  SMBs rarely have the luxury of either time or the money to spend in searching the right service provider.  Fortunately, a new breed of outsource consultants are emerging.  These consultants have built a pre-screened network of service providers.  Most of these networks are informal and lack the rigor of Tier-1 outsource consultants.

A hybrid model is to use the principles of credentialing.  Credentialing helps reduce the risk in sourcing out IT projects.  Credentialing a IT service provider involves verifying the IT infrastructure, project governance and corporate governance.  While Tier-1 players have usually a sound IT infrastructure and a certified IT project governance that is standards based, it cannot be taken as a give for smaller service providers.  The paradox is that it is these smaller niche service providers who are best suited to meet SMB’s IT outsourcing needs. 

Formally credentaling these niche service providers facilitates rapid selection and contracting.  Formal credentialing involves a site visit, validating the IT infrastructure with reference to standards such as ITIL (IT Infrastructure Library), interviews with project managers to understand the project governance, and interviews executives to gain a perspective on corporate governance.  These interviews are backed by a structured audit process that gathers data to help score these objective criteria.  For example, the ratio of project managers to employees coupled with adherence to well-documented processes gives an indication of the commitment to project governance.  While tools that implement these metrics are useful,  the qualitative opinion of the auditor is equally important.  This implies the need for knowledgeable auditors who have experience and training in doing the audits. Vendor assessment tools help speed up the process and reduce the cost. 

A good rule of thumb is to spend less than 3% of the project costs for selecting the right service provider.  The value of credentialing far outweigh these costs.    SMBs can also take advantage of vendors who offer pre-credentialed service provider networks at no cost.    They usually collect a fee from the service providers.

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