AUTHORED BY GUY WOLF, TRANSFORMATION EXECUTIVE @GUIDEIT
Last week we talked about ways to "follow your gut" when making an important decision about outsourcing a significant portion of IT services. Why is it that even as our ability to objectively evaluate vendor bids for outsourcing has improved, we rely as much if not more on our gut feelings than we do on hard, objective data?
We have noticed over the years that the difference between proposals has narrowed on all the objective measures in outsourcing– the service levels, pricing, staff levels, vendor capabilities, etc. (If you haven’t seen it yet, Esteban Herrera of Information Systems Group has a very insightful post about the relative importance of evaluating people vs. the more well-known objective measures.) It can be frustrating to companies trying to differentiate and have a “clear choice.” There is still the hope that a decision matrix can be built that will settle their decision – and give them credibility in recommending to a board of directors. Sadly (especially for math-types), it yields a result that is less than conclusive. Three reasons tend to stand out in why this would be:
1. Consolidation among the vendors: with the normal maturing of this market, this has been inevitable, so it’s not surprising that we’re seeing fewer and larger players as the only ones who can make money at this work with the shrinking margins available.
2. The borders are porous – people move from provider to provider, bringing skills and experience with them. It’s natural that this would be reflected in how the providers deliver and market their services.
3. Marketplace methods have standardized. On both the individual deal perspective as well as the marketplace over time, the evaluators (buyers and the consultants they hire) set the rules for how to make the evaluations. Vendors adjust bids to what works within the rules set by the evaluators.
As a result, when it comes time to make a decision among two or three potential vendors to provide these services, the objective weighted criteria often don’t make it an easy one. There’s so little room between the vendors that only using objective measures makes the decision a toss-up, and you can get the feeling that even after all that evaluation work, it’s not clear which way to go. Why didn’t we just flip a coin?
First, don’t lose heart that the evaluation effort was wasted. You’re actually at the point you want to be and have probably separated much of the wheat from the chaff – a small number of potential providers who really can do the nuts and bolts of what you need done. But beyond this, what’s needed is some very hard criteria around potential vendors’ people and culture – ways to evaluate their capabilities and potential that allow prospective customer leaders to understand and weigh the various elements of their gut feel about the people. We’ll address that in our next post.