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.
10000 AD
In a discussion last night between the Enterprise Irregulars, Thomas Otter commented about Michael Krigsman 's post Is IT becoming extinct? as follows
"..extinction prophecy is nothing new.... I'm sure somewhere in Ramses's tomb there is a bit of hieroglyphics on this matter."
Actually I think in the new movie which predates Ramses by a few thousand years I believe I saw the prophecy it in at least one scene -)
Specific issues I have with Michael's POV:
a) Social Software and SaaS have between them penetrated less than 5% of all enterprises. Both are extremely promising, but hardly mainstream. Michael seems to have been influenced by a mindset prevalent in some social computing circles that the CIO and IT is the "enemy"
As I commented on Shel Israel's blog this weekend:
"I am amazed how arrogant the category of social software really is. Why does it feel the need to boil the ocean, change the enterprise? It has its role particularly in collaboration - but along side not instead of CRM, SCM, ERP, security, telecom and a bunch of other software categories. It needs to do its job well, not worry about the rest of the enterprise.
When it hones its focus and shows appropriate payback, it will find the CIO or IT is not the enemy. Just a bunch of folks trying to juggle a wide range of competing technology initiatives."
b) Alienation of IT? There are today more CIOs reporting to the CEO or COO than did 5 years ago when the CIO was banished to the CFO domain after the Y2K, ERP and ebiz overruns.
Jim Champy's new book Outsmart! celebrates this next-gen CIO and IT.
c) Nick Carr's book IT doesn't matter pointed out technology was so pervasive so as not to provide a competitive advantage. The big “aha” since he wrote that in 2003 is that most organizations have not taken advantage of this pervasive availability and unbelievable economics that startups in the Valley and elsewhere are leveraging.
Michael gives IT procurement way too much credit. In most companies the bigger IT and telco vendors soak up 80%+ of IT budgets. Criticize the $ 5000 a gallon printer ink, the 90% margins in software maintenance, the $ 4 dollar a minute roaming mobile calls larger vendors have gotten addicted to.
As they squeeze these costs, most IT groups are freeing up more budgets for innovations - yes even for social computing and SaaS. But also telemetry, mobility, virtualization, predictive analytics and more. May the best ROI projects rise to the top. And because there are so many promising technology projects, the CIO is becoming the arbiter between all the business process executives. The old vendor line of bypassing the CIO and going to the business executive works far less than it did a few years ago.
I could keep going...suffice it to say I have a feeling when we make a movie about 10000 AD we will still be projecting IT's extinction.
Update: Fellow EIs Charlie Bess and Dennis Holwett add their perspectives
March 24, 2008 in Industry Commentary | Permalink | Comments (4) | TrackBack (0)