Thought Leadership Spotlight

TPI Introduces the 3C Framework for Successful Sourcing Strategies


Key Points

  • TPI believes a strategic, total value-oriented view of sourcing alternatives comprising cost, capability and capacity (“3Cs”), is increasingly necessary for successful outsourcing relationships and effective internal programs of change
  • The 3C framework will give buyers of outsourced services (clients) an important foundation to help structure sourcing evaluations
  • Service providers have the opportunity to articulate value propositions in terms that transcend unit costs and focus on long-term value creation for clients through TPI’s 3C framework

The Need for the 3C Framework: We believe that a new approach is required for both outsourcing clients and service providers to ensure effective sourcing evaluations. As such, TPI has identified cost, capability and capacity – the “3Cs” – as the inter-related dimensions that will yield the greatest influence on the outsourcing market in coming years.

The record shows that having the lowest unit costs for technology-enabled, people-intensive services does not provide assurance of having lowest total cost. Indeed, lowest cost is not the right answer for all business situations.

Low Cost vs. Total Value: As clients and service providers look to take a more strategic, total value-oriented view of outsourcing encompassing these three characteristics, rather than the unit pricing emphasis which has dominated outsourcing most recently, they will achieve better outcomes and more successful outsourcing relationships.

Specifically, we believe organizations should move to a model where the desired outcome of an outsourcing relationship will no longer focus solely on lowest cost of discrete units, especially in respect of labor arbitrage. Indeed, the core questions of whether or not outsourcing is an appropriate strategy should be framed through the lens of balanced consideration of cost, capability and capacity.

Clients are encouraged to compute the value of services beyond unit rates such as hourly wages, discrete commodities, and the like. The capability to deploy new and innovative services to support business objectives and the capacity to access resilient sources of talent and infrastructure will be just as important to the experienced outsourcing user as cost improvements.

Evaluating and Providing Service by the 3Cs: An approach such as the 3C framework gives clients an important foundation to help structure sourcing evaluations and understand the range of flexibility likely to be available over time through the various alternatives for service delivery.

With this knowledge – factored against core business strategies such as acquisitions, penetrating new markets or the introduction of new services – clients will have the ability to perform an informed build-versus-buy evaluation to assess the range of service delivery alternatives available.

We expect that services providers who are other than the lowest-cost source of discrete services will be favored for their conviction around the “total cost” orientation of a client relationship.

Equally, service providers will benefit from TPI’s proposed 3C framework. For them, the 3C framework offers the opportunity to articulate value propositions in terms that transcend unit costs. Through this holistic consideration, factors such as business resiliency and access to leveraged investments and resources may represent added value in the client’s decision-making process.

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