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Tier II: Ability to Execute
After assessing how well the service firm's solutions and capabilities can address your current business problem, you need to assess the firm's actual ability to execute your contract. Here, you want to focus on the "structural" and "human" intellectual properties that the firm will bring to the table. In this step, ask the following three questions:
Are you capturing and leveraging solution IP?
Are you developing your staff?
Do you follow some type of standard methodology when delivering projects?
In his book Intellectual Capital (Doubleday, 1997) author Thomas A. Stewart identifies three types of intellectual property that a company has and can manage: structural, human, and customer. Starting with structural intellectual capital, you want to assess how well the service firm manages their solution IP. It's great that they've implemented the solution before and that they have several references. But what if those customers are halfway around the world and none of the lessons learned from those engagements have made it to the team that will be working on your account? Do they have some type of engagement framework? Do they have access to previous project data? Do they know what problems other customers have hit? If the answer is no to all the above queries, you can conclude that the service organization is not serious about managing IP. This makes all those great customer references almost meaningless.
Once you get a "no" on IP management, you should determine whether the service firm at least follows some type of standard project lifecycle methodology. If not, you need to be really concerned at this point. The firm has now become high risk in terms of its ability to deliver on time and on budget, since they'll be making it up as they go.
If the firm does manage IP, you need to ask one more question in this step:
How do you manage your human capital?
It's great that they're capturing lessons learned, but if the firm can't articulate how they disseminate those lessons learned, you should be concerned. How are technical staff trained and developed? If the answer is fuzzy, how do you know that the team assigned to your account won't be poorly prepared? It's an issue of quality control.
Figure 2 summarizes the decision-flow process for assessing the service firm's ability to execute. At this point, focus on firms that present low to medium risk to you (in other words, they have a higher probability of actually delivering what they say they'll deliver).
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Figure 2 Tier II evaluation of a professional services firm.