Executive Briefings

Mitigate Risk in Outsourcing: Don't Take the Lowest Bid

A risk for potential failure of an outsourcing deal--because it is unsustainable--arises from focusing on cost. Jim Way, vice president of managed services operations for Siemens Medical Solutions, warns, "Buyers beware: don't take the lowest bid." Way explains taking the lowest bid inevitably results in a provider writing change orders and nickel-and-diming the client over time.
"Make sure you know the complete cost of ownership. Make sure the supplier clearly defines this cost and states what is included in what you're paying for," Way adds. "You wouldn't buy a car without knowing that the cost includes tires. But many buyers of outsourcing services neglect to find out if the cost actually includes the "tires"--technology, process changes, etc. that are necessary to get the outsourced work to the end state the buyer desires.
Source: Outsourcing Journal, http://www.outsourcing-journal.com/

A risk for potential failure of an outsourcing deal--because it is unsustainable--arises from focusing on cost. Jim Way, vice president of managed services operations for Siemens Medical Solutions, warns, "Buyers beware: don't take the lowest bid." Way explains taking the lowest bid inevitably results in a provider writing change orders and nickel-and-diming the client over time.
"Make sure you know the complete cost of ownership. Make sure the supplier clearly defines this cost and states what is included in what you're paying for," Way adds. "You wouldn't buy a car without knowing that the cost includes tires. But many buyers of outsourcing services neglect to find out if the cost actually includes the "tires"--technology, process changes, etc. that are necessary to get the outsourced work to the end state the buyer desires.
Source: Outsourcing Journal, http://www.outsourcing-journal.com/