Top 10 Things Every Vendor Should Know About Outsourcing

The Outsourcing Institute shares tips on how to survive and thrive in the outsourcing marketplace

NEW YORK, NY - During the last decade, the outsourcing marketplace has grown substantially. Companies of all sizes are now embracing outsourcing for a vast array of functions and processes. However, most outsourcing service providers are struggling in their attempts to establish themselves in this space.

Knowing what it takes to thrive in the current marketplace is invaluable. Despite the explosion of opportunity, competition is fierce and continues to increase. As a result of The Outsourcing Institutes experience assisting hundreds of new and existing outsourcing service providers, what follows are 10 of the most critical success factors that should be understood and embraced by outsourcing vendors if they are really serious about winning market share in this new service frontier.

1.   This is a different business and thus a different type of sale. To transition from a traditional sales model to an outsourcing sales model, companies have to be prepared to adapt and change - revisit the existing business model. This also includes the funding of new marketing budgets, new personnel and an overall new mindset.

2.   Dont dabble, Commit. The most common mistake of would-be service providers is a simple lack of commitment. These companies clutter the marketplace, masquerading as outsourcing enterprises, when in reality most of their managements attention and investment is actually reserved for traditional product and service lines. Therefore, it is imperative that organizations carefully consider the requirements for success and strategically plan the sales, implementation and management phases of the business.

3.   Pick your place in the market. Decide not to be all things to everyone. Unless you are a large corporation with an extensive budget and have experience crossing over into multiple vertical and horizontal markets, pick your place and stick with it. The smaller the company, the more important it is to have clearly defined horizontal and vertical markets.

4.   Learn to sell to all 3 levels. The outsourcing sales process is more complex than the traditional sales process. The traditional sales process normally involves selling to one level within the organization. Conversely, the outsourcing sales process involves an understanding of 3 different levels within an organization: technical, operational and executive.

5.   Learn when to walk -- improving the hit rate and shortening the sales cycle. The outsourcing sales cycle is long and costly. While the cycles and cost of sales vary, they can easily take more than a year and exceed more than $1M to close. However, outsourcing contracts often span more than 5 years and can be unlimited in terms of monetary compensation to the provider. Implementing and adhering to a disciplined qualification and approval process is the key to knowing when to walk.

6.   The 3 Rs -- Relationships, References, Reputation. To understand the mind of the buyer and what influences the contract decision-making process, The Outsourcing Institute regularly surveys the buyer audience. Consistently, when asked why they chose the vendor they did, always in the top 5 reasons are relationships, references and reputation.

7.   Contracting for risk and reward. Both the process of drawing up a contract, and the document itself, set the stage for successful and strategic outsourcing. It is essential to the success of the agreement that companies put time and effort into understanding and negotiating the document and provide for adequate follow-up and management during the life of the contract.

8.   Influence the influencers. Many vendors tend to target their efforts solely on the buyer community. Understanding the intricacies and the importance of the multi-faceted relationships contributing to the outsourcing process, as well as knowing who the key influencers are, will get you invited to more deals and increase your hit ratio.

9.   Increase your bandwidth through partners. Most companies are struggling with resources. The reality is, more and more outsourcing service providers are partnering to increase their bandwidth. As a result, they are turning towards building relationships with other companies that can provide competencies their own organizations do not have.

10.   Its primarily about saving money. But not ONLY about that. Arguably, the chief motivator for most companies when they consider outsourcing is cost advantage. However, cost savings is not the only motivator. Outsourcing allows buyers the ability to focus on core competencies, be more efficient, more effective, tap into new resources AND to reduce costs.

For more tips and an in depth look into this and other outsourcing topics, OI offers its Vendor Summit: The Key to Winning More Business Opportunities" in New York City on October 24, 2002. For more information or to register go to http://www.outsourcinginstitute.com/roadshow/registration.sp/ or contact Caroline Bush at 516.681.0066, ext. 112 or events@outsourcing.com.

About The Outsourcing Institute
The Outsourcing Institute (OI) is the only neutral professional association dedicated solely to outsourcing. Recognized worldwide for its intellectual capital, outsourcing practice expertise, and unbiased thought leadership, OI tracks and forecasts the rapid evolution of outsourcing while providing new services and programs to assist buyers of outsourcing services. For more information, visit the Web site at www.outsourcing.com.