Selecting an Outsourcing Service Provider
- Published: Thursday, August 11, 2016 07:50
By Jeff Richards
This is the third installment of our series on the outsourcing lifecycle. The first article provided an introduction to the outsourcing lifecycle and its five phases. The most recent article was about Phase I of this lifecycle, Assessing and Documenting Outsourcing Opportunities. Today we’ll do a deep dive into Phase II: Evaluating and Selecting a Service Provider.
This phase starts with the creation of a Request for Information/Proposal (RFI/RFP) and concludes with the selection of an outsourcing service provider.
Prepare and Issue the RFP
We won’t go into the specific contents of an RFP here, other than to say that your RFP should be a well-thought-out representation of the detail developed in Phase I. As previously noted, articulating your outsourcing strategy prior to preparing the Requirements/RFP will provide the touchstone for your entire effort.
You should also use the RFP development stage to think through the RFP scoring techniques you will be using. If this is not designed up front you run the risk of losing time in the evaluation stage by trying to compare apples and oranges when reviewing the submitted proposals.
If you have an understanding of the outsourcing service provider community relative to your needs, you can move directly to a Request for Proposal (RFP) with a small set of qualified service providers. We recommend you contact from three to a maximum of five providers.
If you need to develop familiarity with the service provider community you can issue a Request for Information (RFI), which is just a request for capability based on a high-level requirements document. However, be advised you’ll receive generic responses and put yourself on the lead tracking radar screen of every service provider to which you submit your RFI. If you use the RFI to narrow the field of prospective bidders, you will need to iterate through the RFP to get to Phase III.
Service Provider Proposal Development
Once your RFP has been issued, you’ll have some quiet time when the outsourcing service providers are developing their proposals for your consideration. Or perhaps you won’t have any quiet time at all. Don’t be surprised if they need your assistance to prepare their responses, in spite of all of the thought and preparation that you put into the RFP.
Your procurement team will need to manage all interaction with the service providers for clarification questions, bidder’s conferences, etc. In the interest of fair procurement practices we recommend that you share any question and answer exchanges that you have with a specific bidder with all bidders.
Don’t let the procurement team turn this into an “us versus them” exercise. It is in your best interest that your bidders put their best foot forward and understand your requirements and priorities. No one goes to their doctor for a complaint and says, “Guess where it hurts.”
Proposal Evaluation and Service Provider Selection
The final step in this phase of the outsourcing cycle is the actual evaluation and selection of a provider. At this point you will review the service providers’ proposals, conduct site visits and complete reference checks in order to select a service provider with which you wish to enter into contract negotiations. If you have done your homework properly and developed an effective RFP and scoring model, it should not be overly difficult to normalize the proposals for comparison purposes.
For scoring, we recommend a three-segment approach:
- Objective factors – The firm’s capabilities are scored based on quantified facts, such as process skills, hours of coverage, technology, etc.
- Subjective factors – The firm’s capabilities are scored based on opinions and impressions, such as feedback from reference checks, meetings with service providers’ executives, etc.
- Pricing – It is best if the pricing information is submitted separately or in a format that can be cleanly extracted from the proposals.
Pricing should only be reviewed after the first two sets of factors are evaluated. This will avoid “contamination” of the evaluation team’s initial recommendations and allow them to better understand the value prior to being exposed to the cost information.
Before exiting this Phase we suggest that you advise your second choice service providers to “stand by” in the event that in the next phase you are unable to come to an agreement with the selected service provider.
All other bidders should be thanked for their efforts, released and afforded the opportunity for a post mortem or loss review with a member of your evaluation team and a representative from procurement.
The next article in this series will examine Phase III of the outsourcing lifecycle: Contract Development.
About Jeff Richards
As an inspirational leader with the ability to develop the “big picture” strategy then drive it down to executable tactics for implementation, Jeff leads our Professional Services team. Clients benefit from Jeff’s 25+ years of experience developing and implementing transformative business strategies.
Jeff’s experience spans both industry (including Materials, Operations and IT Management) and consulting. He developed a unique global perspective during his tenure in significant P&L management-level positions in both Asia and Europe.
About CIO Professional Services
CIO Professional Services LLC is a top-rated IT (Information Technology) consulting firm, based in the San Francisco Bay Area, specializing in strategic IT consulting and business / IT alignment. Companies come to us seeking assistance with their information technology strategy as well as to source interim CIO / CTO employees or fractional CIO / CTOs.