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Criteria for selecting an outsourcing vendor

In an outsourcing deal, buyers want to achieve superior quality service at lower cost and minimum involvement. On the other hand, outsourcing the work to an external agency exposes the customer to risks of the work being delivered poorly. In such a scenario, selection of a vendor for outsourcing is a difficult task, which becomes even more complex whileselecting an offshore vendor. Customers generally follow the criteria mentioned below for selecting an outsourcing supplier:

  1. Quality commitment: The vendor should be quality focused.

  2. Cost: The vendor should have prices that enable the customer sufficient cost saving.

  3. Additional resources and capabilities: The vendor should have resources and capabilities that are not available to the customer internally.

  4. Prior work: The vendor should have experience working with other organizations and should have delivered satisfactorily to them. Checking with the references help the customer understand the vendor’s capabilities properly.

  5. Contract terms: The terms of contract should offer flexibility to the client to modify the requirements or terminate the contract easily, if required.

  6. Confidentiality: How secure is the customer’s data at the vendor site? The vendor should have well-defined security policies in place.

In addition to these criteria, other parameters such as location, reporting methodologies, vendor processes, financial stability of the vendor and cultural similarity play a vital role in deciding the supplier.

Key to outsourcing success

Outsourcing involves getting work from an external firm which has limited knowledge about the customer’s internal processes and operations. Hence, a customers needs to pay attention to certain considerations, apart from selecting the right vendor, to achieve outsourcing success. These considerations include the following:

  1. Setting the right expectations: The customer needs to set right expectations upfront about the services that it needs (and will get) from its vendor. It should also have a proper plan in place with well defined (outsourcing) goals and objectives.

  2. Benchmarking methodology: The customer should establish tools or criteria to benchmark the quality of output required from the vendor. Vendor’s performance should be regularly monitored using these criteria.

  3. Experience in handling outsourcing projects: If the vendor and customer both have experience in handling outsourcing projects, the chances of making the outsourcing deal a success increase significantly. Adequate planning and back-up plans for any foreseeable pitfalls will help both the client and supplier maintain a successful relationship.

  4. Internal resistance: The buyer’s management should explain the advantages of outsourcing to its employees and ensure agreement on the outsourcing decision internally before taking the outsourcing plunge. It should gather support for its decision from the top management as well as lower ranked employees.

Last but not the least, the customer should exhibit trust towards its vendor, which in turn should ensure transparency in its operations.

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