How to Bargain With Your Outsourcing Vendor

Learn the secrets of striking the best deal with your outsourcing vendor.

14Feb

Why do companies often choose outsourcing? The number one reason is budget savings. Enterprises are usually in pursuit of high-quality expertise at a low rate. Are there any recommendations on how they can make rates even more reasonable? Read an expert opinion backed up by 18 years of experience in the area that will provide you with the insight into cost-efficient business outsourcing strategies:

Contribute to vendor's reputation

Vendors will give much for a written review that they can publish on their sites or rating and review platforms such as Clutch.co. If you are ready to do such a favor for an outsourcing company, ask for a discount on the grounds that you will lose your anonymity since everybody will find out that you outsource and some of your products are created with the assistance of third parties. You can also protect your business information by concluding NDA.

Pay attention that offering your reference in return for signing a non-compete agreement is not a good idea, because it narrows your outsourcing company’s market. This kind of act isn’t likely to motivate your vendor to give you a desired discount.

Add Quality Assurance to the project

Additional resources may seem to result in unnecessary expenditures, but it's not exactly true. Vendors normally get a huge profit from QA, and if you add it to your project, you'll get a bigger flat rate discount or more qualified specialists, such as business analysts, consultants and project managers. Besides, QA imposes safeguards obligations on vendors. When QA is made on the client's side, all bugs detected after a project’s finish are fixed at the customer's expense. And the costs might be quite high. Order enough QA resources and forget aboutextra billable hours for bug fixing!

Less control and reporting

It's typical for a customer’s company to ask their vendors for detailed reports. Working with remote developers often causes doubts. Do the employees make a good use of the time prepaid by the employer or waste it doing their own stuff? In fact, reporting takes time too. If you have a look at a working time report of a remote software developer, you are likely to see 'filing a working time report' as the number one point. It would be much more convenient for your outsourcing vendor if you controlled the schedule and the result of work and didn't meddle in when it is not necessary. In short, let professionals do their job. Require a report not more often as once a week and better even once a month.

Ask for free bonuses

Many vendors offer free design, UI and UX prototyping at a presales stage. These services are not expensive, and usually outsourcing companies have them in spades. Knowing this, you can ask these services free of charge or at a considerably lower price.

Downgrade the qualification

Be careful with this tip! Qualification assessment methods in the IT industry imply different rates for each level (Junior, Mid, Senior). You can take risks and give a chance for a Junior specialist to prove him- or herself in your project. In case of success, the amount of work will be the same, but you'll get it at a lower rate. But you should not forget about a possible misfortune. Ask for face-to-face online interviews so that you could figure out each candidates' professional skills in person.


Methods that don't work

Promising brighter prospects

There is nothing wrong with talking about the advantages that a vendor will get from cooperating with you, but it isn't likely to make an outsourcing company to lower the price. They are used to hear such things and have already built up a tolerance to silver-tongue of their clients.

Complaining about hard financial situation

Don't cast doubts on your financial viability. Vendors take care of themselves and always assess risks before signing a contract with a client. If your financial capabilities seem questionable, they can ask for 100% prepayment of their services or factor the nonpayment risksin the rate and additional project insurance.

Rejecting further product support

In pursuit of cost reduction, customers tend to decline product support and guarantee maintenance. It's not welcomed by outsourcing vendors, and it doesn't mean them trying to make more money on additional services. Absence of further product support may result in users' negative feedback caused by unfixed problems. That is why outsourcing companies take care of their reputation by adding more QA resources to a project pricelist to be on the safe side.

Rejecting vendor's project manager

It isn't wise to take over the project management, because in this case you'll lose many advantages ensured by outsourcing services. Even if you are a highly experienced manager, working with a remote development team will result in wasting a lot of time on meetings, communication and accountability.

Threatening to pass a project to a less expensive vendor

The pricing of outsourcing solutions provision doesn’t just come off the top of vendors' heads but results from thorough market analysis. So, you can be sure that outsourcing companies are aware of their competitors' costs that, normally, don't vary considerably from their own.

To sum it all up, understanding your outsourcing partner's interests makes your cooperation mutually beneficial. You give something valuable to your outsourcing vendor and get free bonuses in return, i.e. a discount for high quality services. 

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