Executive Summary

Company size has become an important criterion and an integral part of a typical supplier selection process in IT outsourcing. Size is commonly associated with the company’s stability, ability to scale its operations, and ability to deliver a continuous level of performance.

Although size-driven capabilities (e.g., ability to scale up) are certainly important, the most important success factor in an outsourcing relationship is not just ensuring availability of the team but, rather, ensuring availability of a good team. Quality of people (e.g., project leadership skills, domain knowledge), particularly in ADM, often determines the outcome of the project. Smaller companies are more likely to send their best people to the mid-size engagement than their larger counterparts. Large suppliers are wiling to go the extra mile only when they compete for large deals.

This phenomenon creates peculiar dynamics in the growth patterns of the smaller outsourcing companies, encouraging initial growth, but creating a “glass ceiling” once the company’s revenue approaches a certain level. Understanding this phenomenon requires looking at the way typical large buyers view their sourcing portfolios and make sourcing decisions.

This paper discusses:

• Key considerations in deciding on the company size as a supplier selection criterion
• Analysis of rationale of companies that decided to outsource to smaller suppliers
• Buyer-driven view of the outsourcing relationship portfolio
• Size-driven challenges facing growing outsourcing companies and potential strategies to overcome these challenges