Sunday, January 17, 2010

Provider Selection -- How To Choose the Right One

Provider selection is perhaps the most important decision to be made in the course of a services outsourcing initiative, and also one of the most difficult. And there usually isn’t just one service provider that can deliver your services. There are usually several or perhaps dozens of highly qualified firms that can meet your needs, and your job is identify the one you want to do business with.

In these difficult economic times, clients are finding that there is tremendous competition for every sourcing opportunity they identify. With the dozens of companies vying for your business on even the smallest transaction, how do you pick the right service provider from the crowd?

I suggest that your business strategy should be the primary driver of service provider selection. Without a clear business and sourcing strategy, it is difficult, if not impossible, to select a provider that can meet your requirements. It is also easy to focus in on only one dimension of selection criteria, for example, cost, and dismiss or overlook other critical criteria for selection. Many clients these days are overlooking quality and business strategy and going straight for the easiest option -- picking the cheapest solution. This is a tempting, but short term and potentially disastrous view of sourcing. Let's discuss some of the other ways to address service provider seletion.

What parts of strategy are important to define?

Some companies focus on relationship and choose providers because they have worked with them before or because an executive in the organization has a strong relationship with the organization. Perhaps the company feels that the provider does not have the best qualifications, but they fall into the “it’s the devil we know” trap. Some fall in love with the sales team, and make their selection based on marketing ability and rapport. Others focus only on technical qualifications, and overlook the critical dimension of relationship and cultural fit.

Your selection can be made easier if your strategy and vision have been carefully defined, your team is able to communicate this information to the service providers, and you take care to review and verify that the provider not only can do what they say (ie. Have the documented capability and track record), but that they will do what they say (i.e. they are willing to accept risk of performance and put their promises and marketing blitzes in the contract).

Before you start to consider what service provider to invite to the table, make sure you are very clear on the following items:

- Business strategy
- Scope of sourcing
- Personnel and benefits goals
- Operational and Technical goals and objectives
- Degree of transformation required
- Definition of desired relationship model
-- Collaborative or tactical
- Future vision
- Service Delivery Model and approach
-- ( single or multi-source)
-- ( onshore or offshore)
-- (strategic sourcing or tactical sourcing/staff augmentation)

Your strategy will help you determine the both the number of providers selected, the characteristics of the providers selected and ultimately, the winning provider or providers. If your strategy calls for a multi-sourced or best of breed solution, you will need to select a different set of providers than if you are looking for a single source to provide all services. If your strategy calls for a innovation in technology, you will want to identify providers with that particular skill set and track record. WIthout a clear strategy, you are likely to send mixed messages to the provider community, making your task more difficult and increasing the likelihood that you may choose a provider totally unsuited for the task.

In my next blog, I will talk about how to build your selection criteria.


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