Have you ever felt lost in a maze, trying to navigate the best possible provider when purchasing goods? You wander through countless web pages, whiz through hundreds of reviews, and consider endless factors to ensure you are making the right decision. Finding the right IoT vendor for your business is the same, if not more complex.
That’s why outsourcing due diligence is so important for startups and SMEs to better manage their risks and mitigate any failures when working with an outsourcing company. While effective vendor due diligence is unique to each organization, some universal guidelines and checklist can be carried out in the process.
Value of doing outsourcing due diligence
Given the nature of the fast-changing technology industry, many companies, especially startups and small-medium businesses, are putting up with time pressure and were required to release their initiatives as soon as possible to stay ahead of the curve. However, rushing to achieve short-term goals often introduces a more severe problem that hampers long-term efficiency: insufficient due diligence.
Forbes has listed vendor due diligence as one of the five main indicators of why IT outsourcing initiatives are likely to fail.
A Deloitte whitepaper stated that outsourcing due diligence is essential to companies, especially startups and SMEs, that wish to find a partner for their IT projects. Failure to develop outsourcing company selection criteria that contemplate objectives and failure to exercise thorough vendor due diligence are the exposed risks that directly impact the success of IoT projects.
IoT vendor due diligence: The key steps
If you don’t want an outsourcing project with your IoT vendor to run into problems, take your time with vendor due diligence. Here is a step-by-step guide to follow and get sufficient outsourcing due diligence.
- Set objectives for your IoT outsourcing initiatives:
First of all, to evaluate if an outsourcing company is the most appropriate IoT vendor for your business, organizations need to clarify what they want their partners to achieve and what success looks like in their minds.
- Gather information on various IoT vendors:
Once companies know what they want their vendors to do, it’s necessary to conduct an in-depth research on candidates in the market who are capable of doing such work.
- Identify risks:
And then, identifying the different types of risks that your IoT vendors pose to your organization is essential. The risks may relate to operational, financial, legal, reputational, cybersecurity, and environmental matters. Depending on the type of outsourcing partner that you’re looking at, each risk category may hold a different priority.
For example, if you’re looking for an IoT vendor, reputational and cybersecurity might be a focus rather than others. Meanwhile, privacy and cybersecurity are critical factors over operational and financial risks if you outsource your data processing to a cloud provider.
- Conduct risk assessment:
Next step is to assess the level of risk that your outsourcing company presents to your organization via different criteria, including size, industry, certification, history, case study, etc. You can also use a scoring system or a matrix to rank outsourcing companies based on risk levels. It will help facilitate the process of determining your IoT vendor after doing outsourcing due diligence.
- Analyze and report on IoT vendor due diligence results:
A comparison and review of the collected data is indeed essential after conducting due diligence and risk assessment. From which, organizations can identify any gaps or issues. This information must be reported across relevant stakeholders and departments to ensure seamless operations.
- Monitor and update your vendor due diligence checklist:
Last but never the least, monitoring and updating your IoT vendor due diligence on a regular basis is significant. Outsourcing due diligence should be treated as something other than a one-off exercise rather than as an ongoing process. An organization needs to track and measure its IoT vendor performance, compliance, and risk throughout time and adjust the due diligence checklist accordingly.
The ultimate outsourcing due diligence checklist
Understanding that IoT vendor due diligence is not a one-time activity, here is the checklist that you and your team can follow to review and update your outsourcing due diligence checklist regularly. Make sure you can tick most, if not all, of the boxes to find an ideal IoT outsourcing vendor.
- Basic company information:
- Business certificate or license
- Information about the board members
- Incorporation documents
- Company’s structure
- Cybersecurity and data protection:
- Data breach history
- Compliance reports (such as SOC 2 and ISO)
- IT system diagram
- Certificate or proof that shows companies following GDPR or any well-known data protection laws and regulations.
- Results of testing, including penetration tests
- Financial information:
- Annual report, audit report
- Loans and other obligations
- Balance and accounting sheets
- Important tax documents
- Operational information:
- Business continuity plan
- Workplace culture
- Any certificates and awards
- Employee retention rates
- Disaster preparedness plan
- Code of ethics
- Reputational information:
- Any certificates and awards
- Any negative feedback on news or review sites
- Workplace culture
Outsourcing due diligence is extremely important for every business to manage their risks better and mitigate failures when they embark on the outsourcing journey. Effective IoT vendor due diligence that leads to choosing the right outsourcing company as your partner can help your organization unlock your full potential and reach unparalleled heights.
Therefore, by partnering with a reliable partner such as Sunbytes, you can achieve your IoT development goals while ensuring we’ve covered and met your standards in the due diligence phase. Reach out to Sunbytes now and get started on your IoT journey today!
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