IT Outsourcing Roadmap Index

In order to establish a reliable and complete picture about an IT outsourcing service vendor it is necessary to obtain financial information.

However, in many low cost countries companies are very secretive about their financials. Often, it is very difficult, if not impossible, to obtain even very basic financial information. Factors contribute to this situation is that companies do not have, publicly available, financial reporting responsibilities as well as deep distrust in government and competitors.

However, many companies would provide such information as annual revenue, R&D budget, salary levels, financial system, etc. It is important to understand that in many low cost countries personal contact and trust will open different avenues to information in general and also to financial information in particular.

Later in the process you might have a chance to acquire more financial information about the company. Financial analysis and the terminology is part of many books and web resources. So, without being complete, if you have a chance and information is available you should look for information on:

Historical and current basic financial statements (P & L, cash flow statement and balance sheet)

Pricing, cost competition, terms of payment, other payment conditions

External and internal audit and control

Investment estimates and history

Asset quality (balance sheet)

A/R aging

Inventory valuation

Fixed asset valuation

IP valuation

Liabilities (balance sheet)

A/P

debt service

Profitability (P & L)

gross margin

net margin

ROE (Return On Equity)

ROI (Return On Investment)

Liquidity (cash flow statement)

current ratio

acid test

Changes in financial position