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Proven Provider Selection
Although outsourcing is considered a mature business strategy, many transactions either fail or have to be renegotiated within the first two years. Inadequate provider selection techniques (often driven by clients and endured by providers) are significant contributors to such failures.
This research paper explores the effects of sourcing failure, identifies several common mistakes found in typical client efforts and suggests proven provider selection techniques that counter each mistake and helps assure sourcing success for both parties.
What’s at Stake?
Beyond a mere failure to achieve business objectives, an insufficient provider selection process may create ongoing unfavorable conditions for both the buyer and the seller. For the sake of this discussion, the three most damaging results are:
Quite frankly, most of the failure related to poor provider selection techniques lies with a client’s approach to the process. Described below is an outline of common errors.
This research paper explores the effects of sourcing failure, identifies several common mistakes found in typical client efforts and suggests proven provider selection techniques that counter each mistake and helps assure sourcing success for both parties.
What’s at Stake?
Beyond a mere failure to achieve business objectives, an insufficient provider selection process may create ongoing unfavorable conditions for both the buyer and the seller. For the sake of this discussion, the three most damaging results are:
- The loss of expected achievement, or "value leakage"- Value leakage is defined as the gap between initial expectations (of both the client and/or the provider) and the achieved benefits calculated by aggregating the negative net effects of poorly executed governance, operational and relationship factors.
- Misalignment between the client and the market- Unrealistic market expectations, based on either client’s own estimates or the notions of the service providers, help set the stage for sourcing failure.
- Unsustainable Sourcing Relationships- Sourcing relationships are sustained through a mutual commitment to support the other party’s objectives while not compromising the core of one’s own.
Quite frankly, most of the failure related to poor provider selection techniques lies with a client’s approach to the process. Described below is an outline of common errors.
- Common Mistake #1: Poorly Defined "Retained Authority"
- Common Mistake #2: Requirements Documents are not "Market Ready"
- Common Mistake #3: The "Considered Set" of Providers is Too Small or Large
- Common Mistake #4: Lack of Evaluation Tools and Knowledge
- Common Mistake #5: Inadequate Assessment of Culture
