Identifying suitable partners: prepare

Aims and objectives

This phase takes us from the initial decision to proceed with an outsource to the point where we have selected potential vendors and have issued an RFP. A market assessment of vendor(s) is completed and a Request for Proposal (RFP) is developed and issued. Throughout the RFP creation process all services in-scope of the procurement become well defined, are signed off by key client stakeholders and are clearly articulated within the tender documentation.


The Prepare phase is an important step in the  outsourcing lifecycle, as it initiates the first formal  engagement with the vendor(s) and defines the client’s  detailed requirements from the process.

Starting with an initial long-list of vendors, a number  of criteria are applied to narrow down to a short-list.  This is based on the vendor’s ability to meet the client’s  requirements, and could be informed by a Request for  Information (RFI) process.

In parallel, the organisation develops the high level  commercial and financial structure of the deal,  highlighting key success factors and deal breakers.


The key activities of this phase are shown below:



The future processes are developed and agreed internally and used to define the future organisation structure. These will form part of the formal RFP alongside the client’s detailed requirements.
There is also a large amount of stakeholder management activity within the client’s organisation. This is necessary to:

  • Increase visibility within the business of the vendors targeted
  • Communicate the scope of services to be procured
  • Discuss key business Critical Success Factors (CSFs) and deal breakers

Process and scope

At this stage the objective in a BPO deal is to develop a detailed understanding of the processes that will be outsourced. Additionally, the point where an end-to- end process will pass from in-house to outsourced should be defined, i.e. the process split.

Close collaboration with the customer of the services  (business users) is vital at this stage to ensure a smooth  process transition without encountering significant  hurdles and operational risks.

Throughout this activity, leading practices and  benchmarks can be used as the blueprint for the  process designs, although these need to be customised  to meet the individual needs of the client.

In an ITO deal, the scope will have been set in the  preceding Assess phase. At this stage all that will be  required is refinement.

Deal structuring

The objective of this activity is to develop the deal  structure which will set out the key principles and  objectives of the outsource deal, define success factors  and produce financial models which will be used as  the basis for communicating to the vendors the key  objectives of the outsource


  • Consideration of a variety of vendor(s): A variety of vendors should be considered as part of the RFP process to enable a comparison based on skillset, which could lead to a ‘best of breed’ vendor selection. Upon assessment, between 3-8 vendor(s) should be qualified per service, to enable fair competition
  • Choice of RFP style: Make the decision on the style (from highly prescriptive to descriptive) and structure (from one-size-fits-all to modularised) of the RFP based on the scope, timelines and vendor relationship approach
  • Development of a vendor liaison plan prior to issuing RFP: Establish a vendor relationship plan for the entire procurement exercise, which will underpin the vendor communication plan and align the vendors’ expectations from an early stage
  • Clear articulation of vendor proposal requirements: These should be clearly articulated and be informed by the evaluation criteria used in the next phase to support a consistent evaluation across vendors. The pricing response requirements should also be well defined to enable like-for-like comparison and effective scenario modelling

Deal principles should cover a number of dimensions,  ranging from business driven goals to service delivery  goals and incorporate flexibility and agility targets.

Key deal breakers are also defined at this stage, which  will assist in identifying potential show-stoppers  throughout the process and assist with vendor selection.

Vendor management

This activity selects the vendors that are invited to  participate in the RFP process and develops and issues  the RFP document based on the overall sourcing  strategy.

To select the long list of participating vendors, the  following steps are required:

  • Conduct the initial market assessment of outsourcing providers (based on the overall strategy)
  • Agree the vendor engagement approach
  • Issue an RFI (if required)
  • Commence vendor due diligence which will be concluded by the end of the Commit phase

High level assessment criteria for vendor selection are  required to assist in validating vendor capabilities in  meeting the client’s requirements. This is particularly  important if the services being procured deviate from  commodity-type standardised services.

In parallel, the detailed requirements of the in-scope  services are gathered and populated within the RFP  document. Requirements should cover all aspects of  the services and include key volumetric data (to the  extent available) to enable a more detailed and accurate  pricing response from the participating vendors.

Example contents to be covered within an RFP include:

  • Overview of opportunity, in scope and out of scope items, and relevant context
  • Current state description in terms of Process, Technology, People, and Governance
  • Future state requirements for the above dimensions
  • Service transition
  • Affected third party contracts
  • Commercial considerations of the deal
  • Outcome and performance standards
  • High level opportunity timelines

During the creation of the RFP, sessions with the long-  listed vendors are held to brief them of the high level  service requirements and allow for vendor questions to  be raised and addressed early on in the process.

Points to remember

  • Include any relevant industry specific regulatory requirements within the RFP and ask the vendor(s) to demonstrate their experience is meeting these for other clients
  • Establish clear business CSF’s to be met through the RFP process and identify key deal breakers
  • Consider the degree of cultural fit between vendor(s) and client as a criterion in the vendor selection process


The output of this activity is to develop a capability  transfer programme, based on a high level capability  strategy, to transfer the key capabilities of the internal  organisation to the vendor providing the future service.

It requires liaising with key stakeholders to identify the  skills and capabilities to be transferred across to the  vendor at the point of transition and the capabilities  to be retained in-house which inform the internal  organisation design.

It is important to ensure that there are clear lines of  communication with all impacted parties and that a  comprehensive communications and engagement plan  is developed and implemented.


This activity defines the operating model requirements  for the internal (retained) organisation and designs the  future structure of the organisation that will manage  the service post transition.

The current as-is organisational structure is used as the  starting point for this.

The guiding principles for process demarcation  between the retained organisation and the service  provider should be agreed in advance of vendor long-  listing as it will determine the type of vendor required  and help distinguish between service integrators,  managed services providers and output-driven process  vendors

The detailed structure of the retained organisation  should be included as part of the process requirements  in the RFP and will be further refined during the  detailed negotiations which occur in the Commit Phase.

The structure of the retained organisation should also  be informed by the desired service management model.  This is driven by the number of vendors involved in  delivering the services (multi-sourced vs. single-sourced)  and the level of end-to-end service management required  to manage the delivered services which could be part of  the vendor provided services if required.

  • Different Service Management models can be chosen based on the desired retained operating model, the number of vendors involved with delivering the service and the contractual accountability model
  • These include models where the responsibility for the end-to-end service delivery is retained with the client (Model 2), or passed on to a third party vendor who is contractually responsible for service delivery (Model 1)
  • Alternatively, the Assisted Service Integration model (Model 3) could assist with service delivery management, however the contractual responsibility still lies with the client’s retained organisation team.


The objective of this activity is to define suitable tax  structures for the delivery of the required services and  inform the proposal evaluation criteria and financial  model with the appropriate tax treatment considerations  for accurate cost analysis. This is based on the cost-  benefit analysis on the tax profile of the deal.

This activity is particularly important if various legal  entities are considered for the delivery of the services  (joint ventures, offshore shared service centres, etc).

It also covers VAT treatment which is often a particularly  sensitive issue with financial services organisations who  can only recover a small portion of the tax.

Furthermore, tax issues involved with the sale of  assets (e.g. hardware, property) are also considered  and should be examined to understand the impact on  balance sheets and profit and loss statements.

FORFIRM Accelerators And Tools

  • Requirements Analysis Method Pack (RAMP)

This is a source of best practice content and support for  requirements analysis, e.g. when developing technical and  operational requirements for an RFP/ITT.

The method pack includes an interactive software tool that  enables identification of deliverables, tools and techniques that  are appropriate for specific projects. It also contains a library  of deliverable templates including, a roles and responsibilities  matrix that links activities and deliverable responsibilities with  defined project roles and detailed guidance.

  • RFP template

A structured template, including best-practice instructions,  sample content, guidance and questions to help practitioners  develop a comprehensive RFP document for this phase.

This template captures technical, operational and commercial  requirements, which will need to be developed and  communicated to the vendors prior to the Evaluate phase.

If dealing with a multi-stage tender process the RFP can be  updated in the subsequent Evaluate and Commit phases to  invite Best and Final Offers (BAFO) from the bidders.