[HROA Essentials] Outsourcing lists - Proceed with caution

IT'S SILLY SEASON…THE annual ranking of the global services or outsourcing providers, depending on your preference for semantics. Media from the top business magazines to industry organs are getting into the act by adding list making to their editorial calendars. Each is determined to grab onto the global services delivery trend by pronouncing the definitive judgment on the industry's best and brightest, identifying the latest trend or dimensioning the marketplace.

Based on my perusal of the recent crop of publications, one list's number four is another's number 26. If the variations within the recent crop of "global", "best", "emerging" and "top" service providers is any indication, beauty is definitely in the eye of the beholder. And what is magic about 100 or five or 10?

Faced with all these lists, what is the business line sponsor or the corporate sourcing staff to think? Are these lists bogus exercises or helpful tools to evaluate the supply side of the services-delivery equation?

We generally acknowledge the usefulness of lists. Lists give us a simple framework to evaluate relativity and test importance in an increasingly complex world. They serve as an elegant communication tool by allowing us to compare, contrast and share a range of factors and opinions.

Truth be told, I like lists as much as the next man or woman. And as a self-avowed ‘listenista', I confess that in my time, I've ranked the best ice cream in Cincinnati, the most effective business process outsourcing search consultants, and even recently spent my Christmas holidays wading through applications for one of the recent crop of global best-of-breed outsourcing lists. Listing as an exercise helps us to put values and taste in perspective, and forces the next set of questions, starting with a rationale for all.

What Do the Lists Tell Us?

First and foremost, global provider lists are a good public barometer of brand recognition and a reflection of supplier image. They are a stand-in as the services industry's only current broad indicator of brand value. As the industry matures, the use of scientifically constructed and tested brand indices should become more common; however, at this juncture in services evolution, it's what we have to rely upon.

Provider claims of excellence can be supported by the independent opinion of third-party lists. While ranked lists are by no means scientific or meant as an endorsement, they are often used in collateral to provide seeming accreditation in an industry that has no common, recognized standards of excellence of its own at this point in its evolution.

Lists also suggest market trends. Distinguished panels of pundits â€" journalists, consultants, advisors, buyers and academics â€" look closely at the applicants, trying to isolate new trends in service provision or employee management, allowing them to determine whether certain functional offerings are finally ready to meet with market acceptance or detecting whether sourcing is finally moving up the corporate value chain in certain industries.

Lists are also a gauge of marketing prowess. Honest list evaluators admit that the completeness of the applications and the quality of presentation weigh heavily in the evaluation process. The ability to succinctly communicate a value proposition to industry insiders is a good test of market positioning and messaging. If the insider gets the proposition, chances are that the marketplace will understand the message.

Lists both influence and reflect current industry values. The current crop strongly suggest that size and scale matter as there is an apparent direct correlation between service provider size and relative ranking on those lists, which include a best category or are ordinal in evaluation. Over time, as provider track records become more transparent, rankings will imply other values.

Emerging offerings may first reach the buyer's attention through the list process. As a relatively easy marketing and inexpensive marketing exercise, emerging or stage one outsourcers can avail themselves of an opportunity to broadcast the news of their process innovation or new approaches to delivery, judges permitting.

Over time, lists can serve as a good indication of the maturity of the marketplace. As new entrants and new offerings enter the marketplace, lists serve as a good archive of marketplace movement and development year-on-year.

What Don't the Lists Tell Us?

Read the methodological fine print if it is available. Although the data points evaluated may be substantial, not all lists are formulated based on the same or consistent level of rigor. And human nature being what it is, each evaluator brings his own personal biases for certain delivery strategies and approaches to the exercise. At the end of the exercise, individual judges' lists are assimilated into one publishable list, further adding a degree of whim, taste and fancy to the process. These lists are not the last word, but rather the first word in provider selection.

A key component of editorial calendars in the outsourcing industry, rankings and lists, provide a service to readers by identifying players and trends, and are also a business imperative to build circulation and sell adverts and reprints. This is not negative, but rather the way the world goes around.

The lists do not necessarily always evaluate the universe of service providers. They merely evaluate those who "opt in", having deemed the application exercise a good use of marketing time and dollars as well as a good reflection of market perception. Some providers determine, for a range of business reasons, that inclusion is not beneficial at a moment in time because of business performance or the priority of other corporate events. Careful consumers of lists understand that the tallies are by no means exhaustive or inclusive of all offerings that may meet a corporate need, but merely serve as a boost to research.

The Effective Use of Lists

In the right context, services-provider rankings are exceptionally useful tools. Between all the lists, most providers â€" established and emerging â€" are covered, providing some of the initial legwork to identify the universe of outsourcers. This enables the quick assembly of a short list for further desktop investigation.

In aggregate, relative rankings or groupings by disparate groups of judges also serve to guide the buyer. If a provider is consistently ranked or mentioned, especially within those lists, which discriminate by category, it represents some indication of market understanding and acknowledgement of the strength of their value proposition.

The rankings also softly suggest relative movement of the industry over time. As provider positioning changes, factors such as market size, buyer values and provider performance can be implied.

By their titling, lists also push the evaluator to ask the next logical question. If a provider is ranked among the top ten HRO providers, the criteria for evaluating excellence and innovation should naturally be called into question. A good list sponsor helps the readership by clearly and transparently detailing evaluation criteria, prompting a deeper level of inquiry.

Savvy corporate managers prefer to be able to crossreference their decisions through third party opinion. Using a list to effectively support selection ex-post facto is a good way to help outsourcing sponsors become comfortable with a value proposition, especially when the provider's brand is not yet a household name.

Lists can also help to level the playing field for short listing and selection, potentially removing or mitigating the emotion of historic corporate or personal experience with a provider. In this case, market approbation might be used as a counterweight to a previous suboptimal relationship.

However, the only list, which ultimately matters is your company's own ranking of service providers. Factors such as process scope, geographic reach, value proposition, customer approach and performance record…these are just a few of the criteria that drive evaluation. Best advice: Do not add to the growing crop of lists â€" develop your own.

Deborah Kops is Head of Program Planning and Development of SharedXpertise. Formerly a partner in two major professional services firms, Managing Director in two global banks and one of the founding executives in an early business process outsourcing provider, Deborah has a unique perspective on an industry that she believes will flourish, often in spite of itself.

Article originally appeared in Global Services Media