What’s Next
While 70% of enterprises indicate that cost optimization is a
key source of funding for strategic initiatives today, this doesn’t always mean they are swayed by low bids on outsourcing agreements. That’s because most enterprises understand that if a bid is very low, it often signals that 1) the provider doesn’t understand the scope of work being outsourced or 2) they are trying to buy the business.
Both scenarios can result in poor service delivery in the long run as providers try to balance service delivery against lower-than-market margins, especially in the second or third years of an agreement. Experienced sourcing leaders understand this, which means very low bids are often eliminated early.
So, if being the lowest bidder is not a winning strategy for providers in competitive awards, what is?
First, it’s having
market-aligned pricing. This is what differentiates providers with good pricing practices, because it enables them to stay within a price range that enterprises will accept but not leave money on the table. These are the winning bids that are within 20% of the low bid.
Second, it’s about having pursuit teams who listen to their clients and prospects and understand their risk tolerance and value drivers. When providers have a clear understanding of client expectations and scope – and market-aligned pricing – this creates a winning strategy.
