Small-business owners are experts at outsourcing fundamental business tasks – payroll, human resources, design, data hosting, and even customer service – in order to better serve their customers’ core concerns.
But, when looking to outsource IT services, small businesses need to closely manage vendor relationships to ensure that vendors have adequate insurance protection.
Ted Devine, CEO of TechInsurance, notes that selecting vendor partnerships is often one of the most important decisions that small businesses can make. “Small businesses are hesitant, and rightfully so, to forfeit control of their business to outside vendors. However, owners frequently realize that they cannot be chief technology, finance, and marketing officers while also being the president, head of sales, VP of human resources, and any number of other jobs.”
To help business owners better navigate the tricky waters of outsourcing, TechInsurance issued a checklist of questions for small businesses to consider when outsourcing key technology services and solutions. The first step in this checklist is to request proof of Errors and Omissions Insurance coverage, which can ultimately mitigate damages in the event of a cyber-attack or data loss.
“Small business owners rely on a network of vendors to help manage customer needs, many times outsourcing IT services,” said Devine. “But outsourcing services can increase, not decrease, a business’s risks. That’s why small businesses as standard practice should require proof of insurance to ensure that they will not be left holding the bag in the event of a data breach.”
In addition to requesting proof of insurance, TechInsurance recommends that small business owners ask the following questions when outsourcing tech services:
- Can the vendor scale IT services as the business grows? Most small businesses hope to become lasting partners with both customers and vendors – and changing processes can disrupt business. Determining from the beginning of the relationship whether the vendor has the capability to scale can save time and energy in the future.
- Where’s the data? With the potential for natural disasters to take out a single data site, as well as the possibility that servers and storage networks might be compromised by malicious attackers or equipment failure, businesses should engage with firms that have redundant capabilities. That way, should an unexpected event occur, the business will not lose access to or control of important customer information.
- Who will be working on this project? Many smaller tech firms use a coalition of freelancers and professionals to complete and service projects. Therefore, businesses should understand who is ultimately responsible for work in order to make sure that, during and at the end of the project, the right party can be held accountable.
- Does any of the work occur offshore? Offshoring, even for small projects and firms, is commonplace in today’s global economy. Transmitting work and data overseas can introduce risks – and it is better to weigh this into the decision-making process at the start of the contract, rather than after a breach event.