Outsourcing Advisors

Phil Fersht at AMR has a paper on what to look for in an outsourcing advisor. Good read for clients looking for someone on your side as you outsource application support, business processes, IT infrastructure or even look at SaaS.

Let me add some of my firm's experiences as such an outsourcing advisor (along with some of our partner firms).  While we have nowhere the reach of TPI or Gartner or McKinsey, we have worked with some of the largest, most sophisticated companies in the world. Here are some reasons clients like a smaller advisory firm, and others who do not. And why some clients use both types - judiciously:

(Fair warning: it is a bit of a sales pitch).

a) Support for entire process or phases? Some of the larger firms will only engage if you work with them end-to-end - from sourcing to RFP to negotiations. We are a bit more flexible - we have worked with several clients on specific steps e.g. plan and execute the due diligence trip to vendor locations or just help with negotiations.

b) Do you want an advisor, or a doer? Some firms can give you an entire pyramid of program managers, analysts etc. Smaller firms tend to have more senior practitioners - domain experts - clients can bring in as an adviser to their sourcing team.

c) "Edgy" or mainstream? - I helped a client with an India outsourcing deal back in 2001. In the last 2 years we have helped clients look at utility computing models, BPO, SaCS, diversification beyond India to E. Europe and elsewhere. Our clients tend to be more willing to experiment in outsourcing innovations. Larger firms, in general, tend to be better at more mature outsourcing models.

d) Visibility and politics: It is a lot easier for a boardroom to accept a Gartner recommendation than that from a small firm. We have lost a few deals where the client told us that, more than competence, was the reason. Others will hire a smaller firm ahead of, around or behind a major firm to average out their costs and advice and "political correctness".

e)  Specialists or Wider?: I may be generalizing here, but because our firm helps with software, outsourcing and telecom negotiations I find we can bring some unique perspectives and practices from one spend category to another. Skill sets at many larger firms tend to be somewhat silo-ed.

f) Established or disruptive vendors?: I once presented analysis on 30 potential suppliers of all shapes and nationalities to a client. And they asked - who else should we be looking at? Many of the larger advisors tend to be more knowledgeable about - and aligned with - established vendors. It can lead to what I call the Stockholm Syndrome and they tend to be more defensive, less aggressive in negotiating with them. And they don't write blogs with a tag line of "disruptive" -)

Phil's personal blog is a play on the phrase Horses for Courses. I think it aptly sums up what you should consider as you look for an outsourcing advisor.

Comments

[Krishna Mony]

In my line of work where I consult clients for Private Equity fundraising, I face problem (d) a lot. Even as they openly acknowledge my strengths and perspectives, some would stick with the big names and grudgingly bear the 4x fee they charge.

Executives with the Big firms suffer from what I call as "template syndrome".

They often don't structure deals from the client's perspective. They go by the template they used in the last transaction (for due diligence, structuring and documentation). In a post deal scrutiny, a client found conversion price of a 3 year warrant set below the issue price, even as the stock price was quoting 2x the issue price :-)

[Naomi Bloom]

Vinnie, as a twenty-year solo advising end-users on their HRM delivery systems, I've run into all of the above plus one more variation on b). If the client really wants to learn how to do the tasks at hand and to take full responsibility for the resulting recommendations, we're a good fit. If they really want someone else to carry the load, both of the work itself and the responsibility for the outcomes, then we refer them to an appropriate large firm for their project.

[Gregory Yankelovich]

Vinnie,

Do you know of any utility platform in production? I was/am involved in a couple of them in planning or construction, but never seen one actually working (The SaaS model excluded).

[vinnie mirchandani]

Greg, amazon, Joyent others are offering utility models today...though mostly for smaller companies and "light applications" at larger one...