How to Choose an Outsourcing Provider

An effective sourcing strategy is essential for organizations to remain competitive, especially given today’s current economic downturn. An integral component of many strategies is pursuing outsourcing and ultimately the engagement of a third-party provider. The provider can be a long-term partner in an organization’s overall strategy and can impact the sustainable success of the client’s business goals and objectives.

The number of outsourcing providers continues to grow in the marketplace. The leading United States domestic providers have extensive experience in the outsourcing industry since many were established in the early days of outsourcing. They have an established customer base and broad capabilities in information technology outsourcing (ITO), business process outsourcing (BPO) and applications outsourcing (AO).

Offshore providers outside the U.S. have multiplied over the past 10 years. The majority of these providers are headquartered in India, but other countries are quickly offering offshore outsourcing services. At last count, providers from over 30 countries have been added to the offshore outsourcing list.

The National Association of Software and Services Companies (NASSCOM), which acts to promote the India service industry, maintains a membership of over 1,100 information technology companies in India. Given this large number of providers in India alone, it becomes increasingly complex for an organization to ensure the proper selection of a provider and one who meets their outsourcing objectives.

There are a number of factors that must be considered in the selection of a provider. These factors can be segmented into two major categories. The first includes factors that are aligned to the profile of the provider. A few of these include their size as an organization, key delivery capabilities, global footprint, industry knowledge and client base, and the breadth of their technology or functional process experience. The other category includes those factors that align to a client’s expectations for a provider partner. These factors may include the provider management style, ability to integrate into a client working environment and cultural alignment.

Many providers promote themselves as the one-stop answer for all BPO, ITO and AO services. The providers may identify the maturity of their global service delivery model, employee training and retention programs, their collaborative client work standards, world-class best practices, and their low-cost and high service levels as differentiators in the marketplace. In fact, a number of providers share similar credentials, but distinctions can be identified that may assist an organization to successfully select a provider. Factors for further consideration include:

  • Deep delivery capability established in the service line being considered for outsourcing – A provider’s experience in application outsourcing can be vastly different than their capability in information technology outsourcing and even in business process outsourcing.

  • The length of a providers experience in a given service line, which may indicate levels of delivery maturity and investment in technology tools and deployment processes

  • Relevant and positive references and success stories

  • Financial stability and long-range business plans

  • Innovation, constant challenge within offshore providers; providers must stay current on the use of technologies and the deployment of emerging technologies

  • Investments in research and development, which follows technology trends – This is an investment that many providers may shy away from. The providers who invest in R&D are at the forefront of the deployment of toolsets that enhance their global delivery model and improve service levels.

  • Quality achievement – Providers at the vanguard of quality achievement adopt and integrate world-class best practices and standards in their delivery model. Those providers have attained high levels of Capability Maturity Model (CMM) certification, employ Six Sigma project management standards and follow ITIL best practices. These providers work toward continuous improvements, which result in quality and cost-effective improvements for their clients.

The offshore provider selection process is tedious and can be complex. However, the benefits of securing the right provider may ensure a successful outsourcing relationship that can achieve a client’s business strategy and long-term objectives.

About the Author: John Meyerson is a senior research analyst for Alsbridge, Inc. and ProBenchmark, which supports Outsourcing Leadership. Outsourcing Leadership, , is the unbiased source for information on outsourcing, benchmarking and shared services. Find the latest news, trends and sources of research and consulting through our home page, newsletter and events.

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