[HROA Essentials] World-class buyers (pt. II): Getting more robust value propositions

By Joseph Vales and Gilbert Parker, Vales Consulting Group

Today's buyers of ITO and BPO services are looking for more "business value" out of their outsourcing relationships with service providers - and one of the best ways of deriving more business value is to require bidders to present more complete and substantive value propositions during the RFP proposal and vendor selection process.  

To be sure, buyers are demanding more business value in their statement of work requirements, service level agreements, and contract terms and conditions. But they should also require service providers to prepare more formal, definitive, and binding value propositions - which bring together in one separate section of their written proposals all of the value-added services and benefits they will deliver.    

Smart buyers should insist on getting better and more comparable value proposition information from suppliers, so they can distinguish among the bidders and determine which firms will deliver real value to their organizations. The basic proposal issue is that most buyers are not even asking providers for their value propositions; so bidders are not disciplined about developing them. In fact, very few suppliers have built robust value propositions. Most focus solely on cost savings in the pricing section; or they sprinkle some benefits in here and there while answering hundreds of questions, but the benefits get buried in voluminous proposal documents.  

This is why smart buyers should issue RFPs requiring bidders to present clear and concise value propositions that are tailored to the particulars of serving their companies, with all of the client benefits spelled out and quantified. These robust value propositions, we suggest, should be more than just cost savings. They should include a wide range of economic, strategic, operational, technology, human resource, and risk management benefits. Let's take a closer look: 

• Economic Benefits. Buyers need to know what the cost savings/reductions would be in order to justify any outsourcing program. Cost savings of only 10% may be a non-starter, but savings of 20% or more usually opens serious discussions. Buyers should ask bidders where these savings will come from: lower capital investments; lower operating expenses; cost avoidance/minimization; improved cash flow and working capital; high fixed costs converted into lower variable costs; on-demand services and pricing; multi-shore labor arbitrage; and other areas. 
• Strategic Benefits. Buyers need to know how outsourcing will drive revenue and profit growth and support their strategic business plans. They should ask bidders how they will provide better management information, support new product/service development, facilitate market entry and speed to market, and enhance the level/quality of service to customers/end-users. Also ask about transforming the department into a higher-performance organization, and gaining a greater competitive advantage. 
• Operational Benefits. Buyers need to ask suppliers how they plan to streamline operations and deliver economies of scale and processing efficiencies. They need to quantify the benefits of automating and re-engineering the business processes and standardizing them on common technology platforms. They also need to know the benefits of best practices, benchmarking, and continuous improvements. 
• Technology Benefits. Buyers need to know how service providers will collaborate with them to optimize their IT infrastructure and investments; also how they will gain access to the providers' state-of-the-art systems - hardware, software, networking, templates, and toolsets. They also need cost-benefit analyses of outsourcing certain technologies and implementing new systems and web-based applications; and how will these new technologies drive innovation and transformation.   
• Human Resource Benefits. Buyers need to know how outsourcing will reduce headcount and labor costs while also lowering HR administration, recruiting, and training costs. They should ask bidders about their plans to hire in-scope employees and provide comparable compensation/benefits as well as new career opportunities. Also ask about initiatives to increase performance and productivity.
• Risk Management Benefits. Buyers need supplier assurance that outsourcing programs will work effectively with low/no risk, be it operational risk or career risk. They should ask about governance structure, program management office, internal controls, and risk management policies and programs to identify, assess, control, mitigate, and eliminate risks.

In summary, smart buyers can make much better vendor selection decisions if they ask qualified bidders to prepare more substantive value propositions in their proposals. The firms that can best translate their proposed service plans and outsourcing capabilities into robust value propositions that benefit clients will most likely be true partners that come through in delivering the value-added services and benefits promised.   

About the Authors

Joseph Vales is a special advisor to the SharedXpertise Forums. He is the Founder and Senior Partner of U.S.-based Vales Consulting Group, which focuses on helping clients build businesses that seek to dominate markets or market segments. Joe is an outsourcing industry pioneer and visionary with 30 years of management, consulting, and marketing experience with leading professional service firms including Booz Allen, Citibank, and PricewaterhouseCoopers. He is a Founding Trustee of the HR Outsourcing Association, and recipient of the "HR Outsourcing Thought Leader of the Year" Award in 2005. The Vales Consulting Group can be reached in Rye, New York at (914) 967-3200 or via e-mail at jvales@valesconsulting.com.

Gilbert Parker, Partner, Vales Consulting Group, leads the firm's sales proposal process services. He has 30 years of marketing and business development experience with Deloitte, McKinsey, and PricewaterhouseCoopers. He directed, managed, and authored over 265 successful proposals (72% win rate) to the boards and senior managements of Global 1000 companies. Gil is cited as "The Most Successful Proposal Director in the History of Professional Services Marketing," and the "All-Time Heavyweight Champion of Proposal Writing." He can be reached via e-mail at gparker@valesconsulting.com.