You need an organized approach for both types of outsourcing—technical and political. These types are surfaced here because the introduction has been paved with the preceding discussion. A technical vendor is one that will perform specific business or technical work, independent of politics. A political vendor is someone that you require to do business in the specific location. So there are many combinations of these two. You can, for example, have many political vendors and only one or two technical vendors. A political vendor is usually limited to a specific country.

How does an outsourcing firm survive and grow? Obviously, they have to build good relationships with customers. Here are some other factors behind outsourcing:

Most vendors want to build long-term relationships because of the cost of starting up the relationship and building ties. This is especially true in some countries where cultural factors dictate that it takes substantial elapsed time to become familiar with another firm.

Technical vendors see your project as a means to build their capabilities to market to other firms, including your competitors. You should always assume in an international project that the firms will immediately begin to market to your competitors after they sign a deal with you. For political vendors, the situation is different. You will likely select the vendor based on political and cultural factors. This evaluation will be very subjective.

Let’s first address objectives. From experience it is useful to define political, business, and technical objectives for each type of outsourcing that you will consider. If you just consider the technical objectives, then your evaluation could select a technically qualified vendor, but one that is poison for a specific country or region. You must balance the objectives.

If you are first, you are a pioneer and you will likely get many arrows in your back! If you are first, then you have to establish a new way for firms like yours to work with the government. Here is another guideline:

Hire a consultant who worked with an earlier, on-the-spot firm.

This person can provide valuable insight into what is needed and what works and what doesn’t work. You cannot underrate experience. If you do it yourself, you are likely to repeat the mistakes of your predecessors. For a fast food and convenience chain, we suggested that they hire someone who worked with a fast food company to get them started. This can work to your advantage. Many of the people who are good at setting up a company operation are not good at maintenance and operations. They do not fit in. These people have a tremendous amount of knowledge and expertise that will be useful to you.

You also want to be concerned about measurements at this stage. How will you evaluate the vendor’s performance? Can you identify specific milestones and quality standards? For construction or engineering this is rather straightforward. However, for marketing, software, political outsourcing, and other activities, the situation is not crisply defined. Before you go any further, this is the time and opportunity to discuss what constitutes acceptable and unacceptable work. How will the work products be evaluated?

In general, you will be outsourcing more than one activity in international projects. There may be outsourcing in specific countries as well as general outsourcing of a function. Many firms make a basic mistake here. They do not look at what is to be outsourced overall; instead, they address in a piecemeal, ad hoc way one area at a time. This can be a problem for the following reasons:

• The activities to be outsourced may interrelate to each other. If there are problems in this interface, then you are in trouble.

• There may be some economies of scale in outsourcing in which you can combine several activities for one vendor.

In general, vendor requirements constitute a list of the vendor will do and how this work relates to the overall project plan. The more complete the list the better. Here is another guideline:

Associate each task area with potential outsourcing vendors.

At this point it pays to be very open as to what is needed.

For technical vendors you want to define the following:

• Define how the vendor and your staff will collaborate.

• Identify specific milestones that the vendor will be responsible for.

• Determine how vendor work will be reviewed.

• Develop a method for identifying, analyzing, and resolving issues.

In some cases, you are going to want to outsource a specific business activity or process. For political vendors the situation is fuzzier. You should define a specific set of milestones related to permits, licenses, permissions, and other work. Then you can begin to assess how you will measure the performance of the political vendor.

How do you identify specific vendors? One approach is to employ the in-country employees to ascertain what vendors are being used and what results have been obtained. This is good for several reasons. First, it gets the local office involved in the process so that they are part of the solution as opposed to a problem. Second, you probably will get better information than from their head office.

In parallel, work from headquarters to identify potential firms through the accounting and consulting relationships that you already have. You will want to coordinate this with the local office work and indicate to the consultants that you are also doing a local search.

Another approach is to use the Web if you are looking for specific types of expertise. This is a general search and may not yield much. However, every now and then the limited effort has proven worthwhile.

You want to make it clear that there is to be a common project plan. You cannot afford to spend hours in meetings reconciling their plans with yours. There should be an agreed upon approach for tracking issues. We suggest a common issues database. Another thing to insist on in the RFP is that you expect that the vendor staff will participate in lessons learned meetings in which knowledge is to be transferred from them to internal employees on a regular basis—not just at the end of the work. In general, the more detail you put in here, the easier it will be later and the fewer surprises there will be.

Selecting the right vendors for political work is more complex. You have to ensure that the firm is well placed with the government. You can, of course, listen to their sales pitch. However, a better approach is to find out what other firms they have assisted and then see what happened. Again, using a separate consultant to help in this selection can be very useful.

The building of a working relationship does not wait until there is some magic kickoff meeting. You want to begin to use the template and start building detailed tasks with the person(s) who are designated as project leaders for the vendor. Start identifying some issues as well. Then you can discuss how the issues are to be resolved. A basic guideline is:

You want to define and agree on the issue resolution method before significant issues arise.

If you wait until an issue appears, then everyone will have to cope with solving the issue at the same time that they are working on how to resolve issues in general—too much to ask at one time.

You should do joint planning with them to define detailed tasks in the template for their work. By doing this with your employees and those of the vendor, you start to build working relationships that will be very important later. Another guideline is:

You need to create patterns of working relationships and behavior at the start of the vendor’s work.

This has several benefits. First, you see how the vendor thinks and what techniques that they use. Second, your employees will start having detailed technical contacts with the vendor’s employees.

Get some detailed tasks going right away. This shows the vendor that you are serious. If there is a big time gap between when the contract is negotiated and when work begins, the vendor may not think that you are serious and may reassign their staff to other clients. By starting work early you avoid this situation.

The type of vendor and work will dictate the details of how the vendor will be managed. However, here are some useful guidelines:

• Meet on a regular basis to review issues and status. Do this at both headquarters and local levels. Meet more often if there are problems and less often if there is not much going on.

• Make the vendor accountable for specific issues early in the project. This starts to build a pattern for how they will resolve issues. Then you will be better prepared when a major issue appears.

• Monitor the communications and miscommunications between their local and headquarters employees. This is a major problem in some international projects in that when there are communication gaps, people on the receiving end begin to make assumptions. There may later prove to be incorrect. Work has to be redone and undone. The consulting bill to you rises. You want as few middle men as possible in communications.

• Establish a standard method of communications in terms of reporting, use of voice and e-mail, etc.

• Define how tools and methods are to be employed in the project. This should be reviewed early in the project and then reviewed on a periodic basis to ensure that there has been no change.

• Try to have 20% or more of their tasks joint between vendor staff and employees. This helps to ensure transfer of knowledge.

Of course, you will want to build your own score card from this. You will then want to adapt it to each vendor. Go over the score card with the vendor so that they are clear on what is to be measured. Implement the measurement approach every 2–3 months. If you do it more frequently, it will take too much work. If you do it less often, then it has little effect.

• Each vendor will tell you a different story. If you are involved in the interface, you don’t know what happened.

• No one vendor is in charge so none step up to the plate and take responsibility.

• If there is a meeting and a vendor is missing, the other vendors may jump on this and blame the problems on the missing vendor.

As its own project, it requires each vendor to provide a contact lead person who will take responsibility. You will want to generate and track issues as well as progress here as well. In some projects we have had in the past, over 40% of our time was spent in this area.

If this is a political vendor, then you could have a major problem on your hands. If they are well connected, then putting pressure on them may just make your position worse. It is better to sit down with the vendor and start getting into the detail.

A similar approach works with technical vendors. As you become aware that a vendor is not working up to speed or quality, then you should increase your presence in the country and with them. Sit down and review both the plan and open issues. Initiate more joint tasks so that you can see what is going on behind the scenes. As you get more involved in their detailed work, you will acquire more knowledge of the situation.

The Vendor Changes Staff Often

If the problem occurs, then make staff turnover an issue in the project. Indicate the impact and effect on the project due to the loss of knowledge and learning curve as well as by the substitution of junior people. When you use your own employees, you don’t want to cripple the department by getting the best people. For the vendor you want almost the best people. Why “almost the best?” Because the best are likely to be difficult to manage. They may view themselves as prima donnas.

The Vendor Wants to Impose Their Own Management Approach on the Project

This occurs sometimes with larger management consulting firms working with mid-sized client firms. Why do they do this? It makes it easier for them. They can make your project look like a similar one they did a year ago. Maybe they can reuse some of the work and results—it has happened before. They also want control for control’s sake.

What are some signs of this occurring? One sign is that they volunteer to do project management tasks such as reports, notes of meetings, plans, etc. Another sign is that they begin to call meetings and start to direct the internal employees.

This has to be prevented unless you are planning to turn over the project management to them. The project leaders must lay down the rules at the start. Each time the vendor leader starts to intrude into project management, the project leaders need to push him/her back. This should be done directly. After a few times, the vendor should give up.

The Vendor Work and Staff Quality Vary Greatly by Country

This is the case with everything. Let’s suppose you have a commercial airliner. You can get complex and any other repair done in country A. However, it is very expensive. You can get simple repairs done for far less in country B. Your plane has a problem. What do you do? The problem could turn out to be serious. You might want to try country B to see if that will work.

Every vendor who comes to work for you has their own preferences for methods and tools. In many cases, this is not a problem since the method or tool is only required one time. However, there are situations in which the method or tool selected during the project will be required after the project is completed for maintenance and operations support. Then the methods and tools become critical.