Enterprise buyers of offshore services have fallen victim to conventional wisdom built on the fear of the unknown. In an effort to manage risk in offshore-outsourcing transactions, these buyers consistently overspend on long and arduous country and vendor evaluations, and then scrimp on the necessary investments in managing the relationship.
Today, it’s common to see vendor evaluation projects run over six months, sometimes stretching to even 12 months. These projects typically follow a six-step quantitative methodology that starts with an RFI (Request for Information) sent to a long list of vendors, followed by information-gathering visits overseas, and then by an RFP (Request for Proposal) to a short list of 3-5 vendors. After initial review of responses, the process then goes through a bid-walkthrough/oral presentation session with a number of these vendors, finally moving to contracting and vendor finalization. All of the assessment is done by a sourcing team, on a spreadsheet with a weighted scoring mechanism covering a wide range of primarily quantifiable characteristics (rates, resources, infrastructure, processes, skills, technologies, communications redundancy, etc.).
Why do we consistently follow this process (beyond the fact that it makes sourcing consultants a lot of money)? For a number of simple reasons, actually:
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Several years ago sourcing advisors developed this method as an objective way to select vendors, and it stuck
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There was very little credible information about offshore vendors for users to rely upon; often users didn’t even know who the top tier vendors were
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Enterprises were wary of the risk of global sourcing and needed to see a lot of analysis to be comfortable
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Senior managers needed to justify their decision to move into non-traditional sourcing strategies
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Sourcing teams needed a methodical way to justify their choice, both to their executive management as well as the myriad of vendors knocking repeatedly on their doors |
A recent report from Wachovia’s Equity Research team suggested that tier-one offshore vendors are so stretched by the sheer number of enterprises on “fact finding” missions, that they’re pre-screening and turning away potential clients.
Today, however, most of the above reasons are no longer relevant. There is now a significant amount of credible information and experience on offshore vendors; enterprises are more comfortable with the risks; and managers need to justify why they’re not leveraging offshore. This leads us to the reasons why users today should not overspend on these lengthy vendor selection processes.
