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Identify and select a business process outsourcing (BPO) vendor

136 Comments · Business outsourcing

Finding the right BPO vendor is a critical step in an organization’s outsourcing initiative and one at the most difficult to manage.

The promise of BPO is always tempered by the perceived risks associated with handing responsibility for an internal business process-no matter how noncore or mundane it may be-to another firm.

More than one manager has balked at launching a BPO project because of the occasional stones of vendor failure that appear in the media. Many would prefer to play it safe and stay with the status quo than to advance toward what will (or might) be.

With its implications for the long-term strategic direction of the organization, the vendor identification and selection phase of the BPO Life Cycle certainly must be taken seriously.

When an organization enters into a BPO relationship, it is assigning a third party the responsibility of managing part of its business. When such a decision is made, the organization obviously is assuming additional risk.

The vendor identification and selection process has a life cycle of its own, beginning with sourcing the Internet and other sources to identify potential vendors/partners, through the agonizing getting-acquainted stage, the evaluation stage, and, finally, selection.

If all goes well, service delivery works as planned and may even continue beyond the original contract period.

Both parties are satisfied. If things do not go well, the parties disassociate themselves, and the BPO buyer is forced either to find another vendor or to reestablish an internal version of the business process.

In some ways, the BPO vendor selection process is a highly subjective affair. For example, the decision about which vendor to select will ultimately be based in part on how well the buyer and vendor firms relate to one another.

It would be unwise, and probably considered a bit absurd, to select a BPO vendor that was offensive or whose organizational culture was a clear mismatch with the BPO buyer’s culture.

There undoubtedly are qualitative factors in vendor selection (as there are in romance), but the process can also be conducted systematically and with rigor. Large firms, such as Xerox, that pioneered BPO have well-developed systematic approaches for identifying and selecting outsourcing vendors.

Fortunately, the systematic approach that has been pioneered by the large early adopters at BPO has been refined and standardized over time.

The basic steps at identifying and selecting a BPO vendor are now well known. This quasi-standardization means that vendors have developed expectations of how they will be approached and how they will be required to bid on projects.

Becoming familiar with the standard procedures of vendor selection, then, can speed the vendor review and selection process for buyers and vendors alike.


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