Republic of the Philippines

Polytechnic University of the

Philippines
TAGUIG BRANCH

BPO Vendor Selection

Submitted by:
Calag, Lea
Alcala, Mac Wilson
Zervoulakos, Eunice
Gempasao, Gea Rose
Llona, Dharlene Mae

Submitted to:
Ms. MT Sevilla
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Introduction
A vendor is a party in the supply chain that makes goods and services available
to companies or consumers. The term "vendor" is typically used to describe the entity that
is paid for goods that are provided, rather than the manufacturer of the goods itself.
However, it is possible for a vendor to operate as both a supplier (or seller) of goods and
a manufacturer.

BPO vendors can be classified into three distinct types depending on the
history or origin of the company, expertise etc.

1.Traditional IT services/IT Outsourcing companies:

These are big companies that already have a good track record of services in traditional
IT areas. They have started offering BPO services to leverage their expertise and the
client relationships that are already in existence. In India, large IT services companies
like Infosys, WIPRO, Tata Consultancy, Satyam etc. have started offering BPO services
either directly or through their subsidiaries.

2.Consulting firms:

Consulting firms have the distinct advantage of working with several companies and are
hence exposed to the best practices followed worldwide. Their domain knowledge gives
them tremendous competitive advantage as also the CEO level relationships that they
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have built over the years. Hewitt, Accenture and Ernst & Young are some of the
consulting firms in this category.

3.Pure play BPO vendors:

These companies have been set up exclusively for undertaking BPO contracts. Such
companies have mushroomed in the past couple of years, especially relatively lower
and Transcation BPO providers and Niche providers. This growth is especially in the
areas of transcription, call centres, e-accounts etc.

On the other hand, finding the right BPO vendor is a critical step in an organization’s
outsourcing initiative and one of 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 stories 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.

I. Appoint a Vendor Selection Team

There is far more to choosing an outsourcing vendor than there is to choosing a new
supplier. Unlike the buyer–supplier relationship, the BPO buyer–vendor relationship involves a
customized service, detailed agreement on service levels, and a strategically oriented long-term
contract. Given our contention that a robust BPO relationship is strategic in nature, the BPO
buyer and provider must have shared interests in key objectives and values. The relationship
between BPO buyer and vendor will be more intimate than a standard buyer-supplier
relationship. In general, BPO buyer–vendor relationships are characterized by regular senior
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management meetings and sharing of otherwise confidential information. Therefore, harmony

among each firm’s predominant management styles is a key prerequisite to success.
Organizations may elect to keep the BAT intact for the vendor selection process
or they may elect to develop a new team. Many firms decide to empower and charter a new
team to manage vendor identification, selection, and development to introduce fresh ideas and
to provide a clear endpoint to the BAT’s efforts. It is recommended that, whether a wholly new
team is established to manage this phase of the BPO Life Cycle or not, the organization should
consciously select and develop one or, at most, a few individuals who will serve as the
organization’s BPO champions. One or more of these identified champions should be derived
from members of the BAT. The BPO champions will be in charge of developing and deepening
the outsourcing relationship over the long term. Experience has shown that it is better to have
the BPO champion emerge from the vendor identification and selection team than to bring one
in later to manage the ongoing relationship.
In general, if a vendor has limited experience providing outsourcing services in
the BPO buyer’s area of need, selecting that vendor usually leads to unnecessary costs. Basically,
the buyer will be paying for a BPO on-the-job training program. Selecting the BPO vendor that
has proven experience in the buyer’s particular industry will save headaches and a considerable
amount of rework.

II. Establish Qualifications

Similar to searching for a new manager or key executive, it is imperative for the
BPO buyer to establish minimum qualifications for a BPO vendor. These qualifications may
include standard items such as experience, price, and location. The qualification list may also
include more strategic items such as the vendor’s organizational culture, decision-making style,
and reputation.
Whatever qualifications are established by the VST, those critical to the buyer
organization should be decided at this early stage in the vendor selection process. At minimum,
the requisite qualifications should consider both expected performance levels and strategic fit
with the buyer organization. Many firms also distinguish qualifications between soft and hard
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issues. Soft issues include cultural and organizational values, mission and vision statements, and
organizational history. Hard issues are more quantitative and are usually associated with
performance and productivity. In addition to this distinction, some firms also use a weight system
to distribute the relative importance of each issue over the decision process.

III. Develop a long list

A long-list for something such as a job or a prize of a large group that has been chosen
from all the people who applied for the job, or all the people or things that are competing for the
prize. The successful ones from this group are chosen to go on the shortlist.
Choosing the right vendors involves much more than scanning a series of price lists. Your
choice will depend on a wide range of factors such as:

 value for money

 quality
 reliability
 service

IV. Distribute the Request for Information

A Request For Information or (RFI) is a common business process whose purpose is to
collect written information about the capabilities of various vendors. Normally it follows a format
that can be used for comparative purposes.
It is the formal means of getting general information from vendors. An RFI is typically the
first and most broadly cast of a series of requests intended to narrow down a list of candidates.

Characteristics:
 Used when you’re looking for information
 Ask general questions
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 It’s casual. Like grabbing a drink

 Used when you’re not sure what you’re looking for
 Advantage: they’re fast

Writing a Request For Information should include:

1. Overview
Here, outline what you are seeking in general terms, along with some introductory
information about your company. The overview shouldn’t be longer than a few paragraphs. After
reading it, vendors should understand that the document is an RFI, know who you are, and be
clear about what deliverables you require.
2. Details of services required
In this section, you should elaborate in more detail about the products and/or services
you require. Explicitly state any exact specs – such as general pricing, delivery timelines,
personnel requirements, etc. - that are appropriate at this stage.
3. Guidance about how to respond
Include guidelines about the format that recipients should use or, even better, a
pre-made template. Also, include the deadline for responses here.
4. Points of clarification
You can include information about solutions you are not looking for – such as
similar, but unwanted alternatives, preferences for personnel, evidence of past experiences (case
studies), and so on. You may also include information about your evaluation process.

Capabilities Interview
These are specific, job-related questions are designed to assess a vendor's suitability for
the position that are asked personally.
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 What are the Vendor’s core capabilities?

 What metrics does the vendor use to evaluate effectiveness?
 How many clients does the vendor currently serving?
 Where is the vendor investing its resources?
 Does the vendor fit with the buying company’s culture?

V. Distribute the Request for Proposals

Request for Proposal is the process of documentation and solicitation that
communicates your organization's need or availability for a certain service and invites various
vendors to submit proposals in consideration for the opportunity.
RFPs vary in format from organization to organization. At a minimum, the requirements
for the BPO project should be clearly communicated to the vendors. Being detailed in
communication of requirements at this stage ensures that initial responses will provide a full and
clear picture of the vendor’s ability to meet the needs of the organization. The requirements
section of the RFP must reflect the sophistication and experience the vendor will need to
complete the proposal successfully.

a. General RFP guidelines

There are several general guidelines for developing an effective RFP. One of the most
important is to be clear about the business process that is slated for outsourcing and the scope
of work that will be required from the vendor. At the same time, RFPs should not be so long and
burdensome that some qualified vendors will elect not to respond. Several items that should be
included in any RFP are as follows:

- Administrative
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This section includes information about the BPO buyer’s company, business priorities, purpose
of the RFP, deadlines for response, required format, assessment criteria, and contact
information.

- General requirements
This section details expectations regarding the services to be provided, reporting and information
sharing, customer service, claims resolution, contract implementation, training, and benchmarks
for fees.

- Pricing requirements
This section outlines the expected pricing approach, including goals for net rates and volume
discounts.

- Contractual/legal
This section provides details about expected contract terms and conditions, warranties,
remedies, and any disclaimers.

VI. Evaluate the proposals

At this point, you should have a clear idea of what the BPO provider will be able to
provide you, and how your business might change by working with them. You may also gauge the
risks and benefits from a shortlist of BPOs.
Those vendors that have submitted acceptable proposals should be scheduled for
telephone interviews which, at this stage, are generally one-hour in length. The VST can expect
that each of the vendors will suggest a face-to-face meeting. However, the opportunity to meet
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with the VST in a formal presentation should be reserved for the short-list candidates only.

a. Telephone interview
Within the teleconference, the BPO vendor should explain in detail its submitted proposal,
including addressing the following issues:

- approach
- company Background
- experience in the process area
- strengths
- availability
- certification
- suggested solution

VII. Select a Shortlist

Looking for a great vendor to outsource your core functions, looking for as many as
possible vendor is a step to do. Having a lot of choices can help you to choose and find the best
possible vendor you can have. Shortlisting is the key. Shortlisting is putting your listed
qualifications and objectives above your list, and all anyone who did not meet the qualification
should be listed out.

The VST Chairperson Tasks:

• Inform the vendor that it has made the short list
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After listing out those who did meet the qualification, inform those who pass the
shortlisting that they are one step ahead to be your chosen vendor.

• Explain that the vendor has four hours its presentation

Give your vendor a limited time to prepare for the presentation to see how well
they are prepared and if they are even preparing to be your vendor. In the presentation,
what they can offer or the bid should be presented clearly.
• Express interest regarding the vendor’s pricing model

As a courtesy, express your interest for what they are offering for you.
• Reiterate what the organization is looking for in a BPO vendor

Keep on clarifying and reminding these vendors about what your organization is
looking for in a BPO vendor.
• Let the vendor know that there will be a final telephone conference to clarify the bid
submitted

Same with the recruitment for employment, after interview, another interview
waits for you. Don’t forget to tell the presenter that there will be a final telephone
interview for clarifying or negotiating about the bid that was submitted. This final
interview will take place after reviewing all the presentation of the shortlisted vendor.

• Ask the vendor to submit its best bid no later than the deadline you established

Being on time is one factor that should be look after for a vendor. Being on time
also means being a priority.

• Let the vendor know when the decision will be made

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VST member should look for:

• Who has the vendor sent to the meeting?

See who will be the one to present the prepared presentation. I personally think
that having or putting someone respectable from the vendor’s business as a presenter
means this relationship building is important and one of the priorities of the vendor.

• Is the presentation developed uniquely or canned?

Check how the presentation is presented and developed, this can help the team
to see how serious the vendor to be your chosen vendor.

• Does the vendor include contingency plans?

Looking forward for the future means they are looking forward for the success of
the relationship they are building. Also, having contingency plan means they really study
your organization and they are looking forward for what they can give you, and, also, they
are trying to predict problems that they can address immediately.
• What performance data does the vendor provide?

As discussed earlier, history is needed to forecast what they can give you.
• Who are the vendor’s leading clients?

• How well does the vendor team listen to the buyer team?

With this part, the members are looking how well the vendor matches the
qualifications, objectives, and everything your organization is looking for.

• Does the vendor’s presentation address issue in the RFP?

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VIII. Select a Vendor

Final vendor selection should be completed shortly after the second round of face-
to-face presentations. By now, it is usually clear which vendor has developed a proposal that best
meets the needs of the buyer, both short term and long term. If the VST has established its vendor
qualifications early on, weighted them appropriately, and observed both the quantitative and
qualitative aspects of each vendor, it should be able to reach consensus on the final selection. It
must be stated that the VST may decide in the end that none of the vendors is able to meet the
organization’s needs as they have been specified.

If that occurs, it is in the interests of the organization to abandon the BPO project.
As stated, one danger associated with initiating a BPO project is the escalation of commitment
phenomenon. For many executives and managers, the decision to abandon a project after such
a large investment of personal time and other resources is exceedingly difficult. However, sound
business decision making sometimes requires firms to cut their losses and move on. In this case,
if none of the vendors can meet the organization’s specifications after this systematic selection
process has been followed, it would be unwise to attempt to either gerrymander the
specifications or allow the vendor to alter its bid to try to force a fit.

Pre-contract Stage
This pre-contract stage should not be less than 90 days—long enough to allow
anything unexpected to arise. Remember, the BPO buyer and vendor are attempting to develop
a partnership, and there are going to be problems that must be worked through.
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Steps
1. Allow employees to air their concerns and ask questions
Allowing employees to air their concerns and ask questions may help reduce the feeling
among employees that they are being cast aside. Conflicts in style and personalities may
emerge in these meetings that could affect the vendor’s performance.
2. Address issues of terms and conditions of employment
The firms should also address issues of terms and conditions of employment, including
appropriate compensation if vendor employment is not available or not required. If any
additional training will be required as a result of joining the new organization, it should
now be brought to light.
3. Discuss the objectives of the new work processes and what the organizations want to
achieve
Leaders of the BPO implementation from both parties should discuss the objectives of the
new work processes and what the organizations want to achieve. All members of the new
inter-organizational work team should understand their personal contribution to the
team’s success. Many problems can be avoided by communicating regularly and
vigorously with employees at this early stage of the BPO implementation.9 Up to this
point the rumor mill may have been going full speed and people had no idea who or what
to believe.
4. Make certain that the contract will stand up to the rigors and complexities of the actual
operation
A trial period is ideal for making adjustments before the contract becomes final and for
judging the likelihood of the partnership breaking down.

Main Issues in Selecting a Vendor

 Unexpected work that has surfaced
 Effects of the unexpected work to the cost model of vendor’s proposal