Daily Archives: January 21, 2009

A Great Guide to Outsourcing Risk Management, Part II

Yesterday we discussed the starting point of your outsourcing project and how you go about selecting service providers to issue RFPs to. Today we will discuss proposal evaluation and remind you to check out the full series on outsourcing risk management by Alsbridge, as printed by SourcingMag.com, that this series is partially based on.

So How Do You Evaluate The Proposals?

Before you start, you should have an evaluation plan and a weighting scheme that weights each proposal that meets your minimum requirements on a comparable scale that addresses, at a minimum, solution completeness, solution cost, provider experience, proposal complexity, leadership capability, deal importance, and how. Then, if there is a clear winner, you start negotiations with the pack leader. If two, or three, solutions, are close, you can request additional information in a follow-up RFP, provided you specified in your original RFP that a follow-up round will be held if the organization feels that it does not have enough information to make a final selection. So what are you looking for?

  • Solution Completeness
    To what extent does the solution being proposed meat your requirements?
  • Solution Cost
    How does the cost stack up compared to the other proposals relative to the completeness of the solution being proposed? Be wary of proposals with an extremely low price tag that seem too good to be true — they usually are.
  • Provider Experience
    How much experience does the provider have delivering solutions of the completeness and complexity they are proposing?
  • Proposal Complexity
    Is the organization able to offer the complete solution on its own, or will it need to partner with one or more external organizations? Be wary of proposals that require a team of external participants to deliver … since the communication and coordination challenges increase exponentially with each additional participant.
  • Leadership Capability
    Has the provider led the previous projects of similar complexity, or merely been an understudy? You’re looking for a provider who will take ownership of the processes and systems you’re outsourcing … if you have to guide them every step of the way, you might as well just keep the processes in house!
  • Deal Importance
    How big is this opportunity to the provider and, conversely, how important will you be to them as their customer? If this deal would double their size and represent half of their income, you’ll be pretty damn important. However, if you’d represent less than 1% of their income, you’d be pretty far down on their priority list and the vendor might not be that responsive when problems arose that needed immediate resolution. However, be wary of being too important … if they have to tie up all available resources just to get started, what extra support will be available down the road?
  • How?
    When reviewing every statement of action, be sure to look for How?. If the answer isn’t in the proposal, you might have a problem. For example, if they are proposing that they will open a new support facility just for you near your location, you want to know how they are going to do this in the timeframe allowed. It takes time to hire and train people, and even though the big three can ship servers within a week, it takes time to set them up, and telecom circuits alone can take over 60 days to order and install.

Once you’ve selected you’re preferred provider, you can move on to the contract, which is the subject of the next post in this series.