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Fast-Tracking: Does Sticking with One Service Provider Save Time and Money?

by ISG

Perhaps your organization has a contract already in place with a service provider, and you are thinking those pre-negotiated contract terms and conditions might save you time and money in sourcing the next area of your business. Or perhaps your organization decides that skipping a competitive process and sourcing directly with one service provider will be more efficient. Of course, sole-sourced contracts can be successful, but these Top 5 suggestions remind us that a competitive solicitation process delivers increased knowledge and relevant pricing to client organizations.

Top 51. Know your company’s strategy. Being clear on what the enterprise wants to achieve in support of the corporate and functional objectives will ensure project money is spent in support of the overall strategy. Take time to develop a financial base case that maps your current costs to deliver the services (in- or outsourced) to an industry standard approach so that your sourcing activities are performed with deliberate strategic objectives in mind, rather than being ad-hoc acts of contracting.

2. Know your own organization’s skills and competencies. During the sales process, the service provider will collaborate and cooperate to define the scope. Your company’s maturity in negotiating market terms and conditions, as well as pricing, will lag significantly behind those of the service provider. The lack of comparison to other bids will deny you the data you need to negotiate effectively. Knowing specifically what your organization can and can’t do will help you to get expected results from a sole-sourced approach.

3. Increase your knowledge of current market capabilities. You may not always know market capabilities at any given point in time as well as you think you do, and you may be doing a disservice to your organization. The absence of competition prevents you from having key market knowledge to discuss scenarios and alternatives with the eventual selected service provider. Solicit bids from more than one service provider as a form of valuable education.

4. Determine if your organization can afford the lost time of a failed relationship. The lack of competitive tension in the initial engagement can mean that the service provider is less pliable. As a result, you might find that you have to start all over again, and this may cause you to put your organization through the pain of yet another transition and further delays in achieving your operational and business case objectives.

5. Take the time to gather information needed for an intelligent conversation with the service provider. Even when the need for commitment and results is urgent, the devil is in the details, and time spent discussing the principles and foundation of the agreement will save time in the negotiations phase. Except where the leverage is high, it can be difficult to secure the most favorable contractual terms, price and service levels when the service provider does not feel a competitive threat. These are complex contracts, and clarity is essential.

To discuss the benefits of a competitive transacting process further, contact Melany Williams.