Outsourcing Vendor Selection Final

Jan 2003

WHITE PAPER

Outsourcing Vendor Selection Key to ‘Win-Win’ Strategic Outsourcing Relationships

E-mail: [email protected]

www.hssworld.com

Outsourcing Vendor Selection

O

utsourcing skeptics claim that an outsider

synergy from the human resources perspective and

cannot give the same concentration and focus

this also helps in opening multiple channels of

as the in-house team. It therefore becomes

communications between the organizations.

imperative to do thorough vendor-scrutiny before entrusting critical technical roadmaps and confidential information on him. Understanding

the

emphasis

of

a

vendor’s

business, or what it is that drives the vendor, is essential in choosing the appropriate vendor to meet specific needs. The vendor selection team should be a cross-functional team comprising senior management, legal staff with contract expertise, technical staff, end users, and financial staff.

Hard-issues HSS proposes a vendor-selection checklist (see next page) to evaluate the outsourcing vendor on the hard-factors. The parameters on which the vendor must be measured have been carefully chosen, and it is advised that before entering into a relationship, the vendor-selection matrix must be completed. Further, while making the final decision based on

While hard-issues like offshore vendor’s financial strength, experience and expertise, resources, brand etc can be gauged on a tangible scale, the problem lies in the more obscure soft issues, which can make a big difference.

our vendor-selection checklist, it is advisable to assign weights to the parameters mentioned. Selecting the ‘right outsourcing vendor’ is the key to a successful relationship. It is therefore imperative to take into account the softer aspects of relationship building also, besides the ‘much-considered’ hard facts.

Soft-issues

Many

These include intangible parameters that have an

outsourcing

alliances

begin

with

the

outsourcer exhibiting the best-of-breed qualities. From

important bearing on the outsourcing decision and are

carefully planning

often ignored. The organization must take these

outsourcer’s premises, to the time the contract is

qualitative factors into consideration while evaluating

signed, the outsourcer puts across excellent project-

the offshore outsourcing decision.

execution capabilities.

the

client’s

visit

to

offshore

While selecting an outsourcing vendor, conscious

After a year or so, the honeymoon is over. Cost

efforts need to be put in place to understand vendors’

reductions and efficiency enhancements turn out to

pursued business and technology roadmaps, the

be minimal at best. The outsourcer, on the other hand

cultural

vendor’s

struggles to address obscure business objectives and

history/lineage; mission and vision statements etc.

meet aggressive performance targets, all the while

Such

focusing on its own profit margins and bottom-line.

and soft

organization-values;

issues

should

be

synchronized

between the partnering organizations to reach a mutually befitting comfort-level.

All this can be avoided if vendor-selection is done taking into account all aspects of the relationship. The

Furthermore, it should be borne in mind that

initial amiability can be maintained if a thorough

support and commitment from senior management

analysis is done involving all the hard as well as soft

are essential in establishing strategic relationships.

aspects.

The cultural and organization-values of partnering companies should be matched to ensure that there is

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Vendor Selection Checklist #

Parameters

Weight

1

Experience & Expertise

0.15

2

•

Experience with similar projects?

•

Offering Outsourcing services (in years)?

Strong Track Record

0.2

•

Past performance history / reputation?

•

In-house facilities to meet agency’s business needs?

3

Ability in handling technology transitions?

0.09

4

Financial stability

0.09

5

Resources

0.15

6

7

•

Employee Strength

•

Hiring process

•

Employee Demographics

•

Retaining / Training Policies

Flexibility

0.15

•

Business Model Flexibility

•

Scalability for ramp-up / ramp-down

Confidentiality Comfort

0.17

•

Well-defined security policies

•

IPR protection norms

•

Business Continuity Plan

•

Quality Standards

Outsourcing is a decision of trust and can be

or the matching of technical roadmaps, every iota of

made into a fruitful ‘win-win’ relationship if there is a

the partnering companies should be considered while

perfect

evaluating an outsourcing vendor.

harmony

between

the

partnering

organizations. All aspects of the concerned organizations should be synchronized - be it the matching of value system,

For more information, please visit on our website http://www.hssworld.com/services/services_hom e.htm

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