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Vendor Selection

Vendor Selection

“Outsourcing is an art, not a science,”, “You’re not only selecting the right vendor, you’re selecting the right vendor that meets your needs.”
Keith Pallesen, GMAC Mortgage Sourcing Consultant


5 Key Value Points

1. Identify your needs
2. Clearly define scope of work
3. Well documented contract
4. Service Level Agreements
5. Governance and metrics


Outsourced.SK can provide strategic level consulting to assist you with the planning, assessment, due diligence and implementation of IT related business initiatives.

Considering outsourcing but don’t know where to begin? Contact Outsourced.SK to discuss the potential of nearshore solutions.

So where do you begin? Google “outsource vendors” and you will have thousands of hits ranging from Mumbai to Shanghai, from massive foreign vendors with thousands of employees to a few people in a cramped space with dial-up internet connection.

So take a deep breath, pour yourself a cup of coffee (or a Red Bull if you prefer…) and read on.

Selecting the right vendor is the most important factor in a successful outsourcing partnership according to 63% of respondents in a Syncroness, Inc. survey.

Consider a 2-phase approach to the vendor selection process; Phase 1 Vendor Analysis and Phase 2 Vendor Selection.

Phase 1 Vendor Analysis

Now it’s time to gather your team together and do a little homework. Define your vision, goals and scope of work. Identify vendors through business network referrals, trade magazines and this time try googling “Outsource Vendor Directory”, or save time and go to www.Outsourced.SK. Request vendor information, create your shortlist and consider a small pilot if appropriate.

  • Identify your vision, strategic goals and needs
  • Clearly define the scope of work you intend to outsource
  • Identify potential outsourcing vendors across a variety of geographic areas
  • Submit a Request for Information (RFI) to learn more each vendor
  • Create a shortlist and ask them to visit you, or preferably you visit them
  • Consider a small pilot project prior to formal RFP and selection process

Phase 2 Vendor Analysis

With the initial vendor analysis complete, you can now move into the final stage of issuing an RFP, proposal evaluation, vetting vendors and contract negotiations.

  • Create your RFP and send to your vendor shortlist
  • Evaluate RFP responses looking for alignment to your needs and ability to deliver
  • Request vendor references, contact clients for feedback
  • Schedule onsite meetings to review RFP, preferably at vendor’s business center
  • Clearly define expectations for process, deliverables and governance
  • Contract negotiation for win-win situation and flexibility to change over time
Top 10 Factors in Vendor Selection
1. Commitment to quality
2. Price
3. References/reputation
4. Flexible contract terms
5. Scope of resources
6. Additional value-added capability
7. Cultural match
8. Existing relationship
9. Location
10. Other
Top 10 Factors for Successful Outsourcing
1. Understanding company goals and objectives
2. A strategic vision and plan
3. Selecting the right vendor
4. Ongoing management of the relationships
5. A properly structured contract
6. Open communication with affected groups
7. Senior executive support and involvement
8. Careful attention to personnel issues
9. Near term financial justification
10. Use of outside expertise

Source: The Outsourcing Institute’s Annual Survey of Outsourcing end users


If you need to formally assess outsourcing processes you may use eSCM – eSourcing Capability Model which applies to both Provider and Client:

The eSourcing Capability Model for Client Organizations (eSCM-CL)
The eSourcing Capability Model for Service Providers (eSCM-SP)