5 Step Process for Selecting your Outsourcing Services Provider

As effective as outsourcing has been, the key to your success lies in finding the right outsourcing services provider. Because of its exponential growth the past 15 years, more service providers have entered the industry trying to get a piece of the US$548.5 Billion outsourcing pie.

With a deluge of choices comes the risk of quality of service becoming diluted. The number one reason companies outsource is to reduce business costs. In a highly competitive market and with the absence of quality assurance measures, pricing becomes the key differentiator.

The market for outsourcing services providers has become cutthroat. Prices are dropped to levels which should arouse suspicion but apparently do not because these practices still exist and thrive in the industry. It has commoditized the industry but not without unwanted effects.

Despite its sharp upward trajectory, outsourcing has had its fair share of critics. Some companies claim outsourcing was over-rated and the service provider underperformed. Most alarming are those who report they were victimized by online scammers.

The truth is outsourcing offers businesses several advantages. Outsourcing as a process shines during times of economic downturn. It provides you a double- edged sword to maintain profitability: reduce business costs while increasing the level of productivity.

But in an ocean teeming with outsourcing services vendors, you should know which fish to cast your net upon.

Here is an easy 5 step process for selecting your outsourcing services provider:

Step 1 – Identify Your Business Requirements.

The first step to outsourcing starts by answering the question: “Why are you outsourcing?” Given its multitude of benefits, there could be more than one reason for this:

  • Reduce Cost – As discussed, the primary reason for outsourcing. Perhaps you should start small and get your feet wet by outsourcing non-essential tasks such as administrative work.
  • Increase Productivity – In addition to non- essential tasks, you may want to outsource back office work such as Human Resources, IT and Accounting. This way you can re-align your resources only to the core functions of your business.
  • Improve Work Quality – You could also outsource highly specialized tasks which require their own time and attention to become more effective. These highly specialized tasks include customer support, digital marketing and telemarketing.

Once you have identified the tasks you want to outsource, then it becomes easier to find the right outsourcing services vendor.

Step 2 – Research on the Right Outsourcing Vendor.

The Philippines and India are the consensus top 2 destinations for outsourcing services providers. The Philippines is widely reputed for customer support and telemarketing while India is known for world- class IT services and back office support.

But these countries have a large pool of outsourcing vendors. It would be difficult to pinpoint the right vendor. The exercise would be analogous to trying to find a needle in a haystack.

The best approach would be to conduct research. Here are some tips on finding the right outsourcing vendor:

  • Contact the local regulating agency and ask for recommendations or referrals. In the Philippines, the regulating agencies are the Business Process Association of the Philippines (BPAP) and Contact Center Association of the Philippines (CCAP). These agencies have many outsourcing centers as members.
  • Sign up and join focus groups in social media and ask for recommendations. There are a number of outsourcing focus groups in LinkedIn. You can join and engage with members to find out more about their experiences with outsourcing. They may also give you referrals to reputable vendors.
  • Ask for recommendations from friends and associates. Given the popularity of outsourcing, for sure a few of your friends and associates know someone directly involved in outsourcing.
  • Conduct due diligence. Once you’ve received some recommendations, always conduct due diligence work. A simple Google search may yield valuable results.

Step 3 – Send a Request.

Come up with a short list of at least 3 qualified outsourcing services providers. Then communicate and ask them to submit a Request for Proposal (RFP) or Request for Quotation (RFQ).

Before the service provider can comply, they may send you an RFI form or Request for Information. This is a highly detailed form which will require you to answer both general and specific questions on outsourced projects. The RFI will be used as the reference guide for making the RFP or RFQ.

Step 4 – Initiate the Qualifying Process.

Once you have received all of the RFP’s do not eliminate the service providers based on its contents or pricing. Remember, everything is negotiable. As the service provider gets more details on your business needs, the quotation can be fine- tuned.

You should schedule an audio- video interview between your outsourcing team and theirs. Prepare a list of questions the answers of which your team has fully researched beforehand and discussed. The questions should cover the following topics:

  • Time- lines
  • Hiring Process
  • Data Security and Integrity
  • Systems; Processes and Frameworks
  • Existing Technological Profile
  • Organizational Culture
  • Grading and Performance Evaluation Processes
  • Current Training and Orientation Programs
  • Current Career and Succession Planning Programs
  • Social and Cultural Nuances
  • Disaster Recovery Planning

Step 5 – Contract Negotiations

Rank the Service Providers in order of preference. Prioritize negotiations with the first outsourcing vendor and initiate contract negotiations. You should submit the following contracts to the outsourcing vendor:

  • Service Level Agreement (SLA)
  • Memorandum of Agreement (MOA)
  • Confidentiality Agreement (CA)
  • Scope of Work
  • Schedule of Payments

It is possible that the outsourcing services provider may want to use their own set of contracts. But it would be best to stay with a single contract and it should be the client’s. Contracts are subject to negotiation. The provisions in the outsourcer’s contracts could be discussed, negotiated and considered for inclusion in the original agreement.

Make sure your SLA defines the conditions for pre- termination of services and outlines the penalties for any breach on its provisions. This acts as your Exit Strategy should the outsourcing agreement fail to deliver results as expected.

Selecting an outsourcing services provider is a process in itself. But it is a process which you must undertake with purpose and strategy in order to find the best fit outsourcing vendor.

Keep in mind that the greatest value of outsourcing does not lie in pricing alone. Do not select based on pricing alone but on the overall value proposition presented by the outsourcing vendor. Outsourcing services is an effective solution in times of uncertainty. It will not just help you survive during volatile periods but even thrive.