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Jan 2003

WHITE PAPER

Outsourcing VendorSelection

Key to ‘Win-Win’ StrategicOutsourcing Relationships

Outsourcing Vendor Selection

2

utsourcing skeptics claim that an outsidercannot give the same concentration and focus

as the in-house team. It therefore becomes

imperative to do thorough vendor-scrutiny beforeentrusting critical technical roadmaps and confidential

information on him.

Understanding the emphasis of a vendor’sbusiness, 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 across-functional team comprising senior management,

legal staff with contract expertise, technical staff, end

users, and financial staff.

While hard-issues like offshore vendor’sfinancial strength, experience and expertise,resources, brand etc can be gauged on atangible scale, the problem lies in the moreobscure soft issues, which can make a bigdifference.

Soft-issuesThese include intangible parameters that have an

important bearing on the outsourcing decision and are

often ignored. The organization must take these

qualitative factors into consideration while evaluatingthe offshore outsourcing decision.

While selecting an outsourcing vendor, conscious

efforts need to be put in place to understand vendors’pursued business and technology roadmaps, the

cultural and organization-values; vendor’s

history/lineage; mission and vision statements etc.Such soft issues should be synchronizedbetween the partnering organizations to reacha mutually befitting comfort-level.

Furthermore, it should be borne in mind that

support and commitment from senior management

are essential in establishing strategic relationships.

The cultural and organization-values of partnering

companies should be matched to ensure that there is

synergy from the human resources perspective andthis also helps in opening multiple channels of

communications between the organizations.

Hard-issuesHSS proposes a vendor-selection checklist

(see next page) to evaluate the outsourcing vendoron the hard-factors. The parameters on which the

vendor must be measured have been carefully

chosen, and it is advised that before entering into arelationship, the vendor-selection matrix must be

completed.

Further, while making the final decision based onour vendor-selection checklist, it is advisable to assign

weights to the parameters mentioned.

Selecting the ‘right outsourcing vendor’ isthe key to a successful relationship. It istherefore imperative to take into account thesofter aspects of relationship building also,besides the ‘much-considered’ hard facts.

Many outsourcing alliances begin with the

outsourcer exhibiting the best-of-breed qualities. Fromcarefully planning the client’s visit to offshore

outsourcer’s premises, to the time the contract is

signed, the outsourcer puts across excellent project-execution capabilities.

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

reductions and efficiency enhancements turn out tobe minimal at best. The outsourcer, on the other hand

struggles to address obscure business objectives and

meet aggressive performance targets, all the whilefocusing on its own profit margins and bottom-line.

All this can be avoided if vendor-selection is done

taking into account all aspects of the relationship. Theinitial amiability can be maintained if a thorough

analysis is done involving all the hard as well as soft

aspects.

O

Outsourcing is a decision of trust

made into a fruitful ‘win-win’ relationshipperfect harmony between the

organizations.

All aspects of the concerned organizabe synchronized - be it the matching of v

# Parameters1 Experience &

• Experienc• Offering O

2 Strong Track• Past perf• In-house

needs?3 Ability in han4 Financial sta5 Resources

• Employee• Hiring pro• Employee• Retaining

6 Flexibility• Business• Scalabilit

7 Confidentiali• Well-defin• IPR prote• Business• Quality S

Vendor Selection ChecklistWeight

Expertisee with similar projects?utsourcing services (in years)?

0.15

Recordormance history / reputation?facilities to meet agency’s business

0.2

dling technology transitions? 0.09bility 0.09

Strengthcess Demographics / Training Policies

0.15

Model Flexibilityy for ramp-up / ramp-down

0.15

ty Comfort 0.17

3

and can be

if there is apartnering

tions shouldalue system,

or the matching of technical roadmaps, every iota of

the partnering companies should be considered whileevaluating an outsourcing vendor.

For more information, please visit on our website

http://www.hssworld.com/services/services_home.htm

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