When it’s time to outsource, selecting the right outsourcing advisor may be the single most important decision you make-one that sets up your future relationship with an IT services provider for success or failure. Given that IT outsourcing transactions are complex and vendors are savvy at setting them up to their advantage, solid sourcing advice from a third party can help to level the inherently uneven playing field, particularly for less experienced IT services buyers.
But deciding which sourcing advisor is right for you is trickier than it may seem. All sourcing advisors are not equal. A big name firm may not give you the attention you need. A start-up may not have the depth of experience you require.
“There has never been as great a need for outsourcing advice as there is today, and there has never been such a plethora of advisors competing to give their advice,” says Phil Fersht, former AMR analyst and author of the outsourcing blog Horse for Sources. (Fersht now works for vendor Cognizant Technology Solutions.) “Whether you are a highly-sophisticated enterprise with your outsourcing experience or a complete novice, you will most likely have to engage a third party at some stage during the outsourcing lifecycle, whether it’s simply to administer and negotiate a complex contract or to hold your hand through the entire evaluation process.”
There are some general qualities that make for a good outsourcing guide. “The very best advisors are not only guardians of the clients’ interests, but are also excellent facilitators, who understand both sides’ perspectives, risks and interests, and can work creatively and constructively to find solutions that permit both sides to succeed,” says George Kimball, an outsourcing attorney in the San Diego office of Baker and McKenzie.
Here are six tips to help you choose your outsourcing consultants wisely.
1. Know your goals. “Make sure you define your basic sourcing strategy before selecting the sourcing advisor,” says Richard Matlus, research advisor for Gartner IT Services and Sourcing. For example, is your impetus for outsourcing to reduce costs? If so, adds Matlus, select an advisor that will help you achieve that goal. Some advisors excel at holding vendors’ feet to the fire on prices, while others specialize in other areas.
2. Bigger is not always better. Outsourcing advisors come in all shapes and sizes, from the big name firms that charge correspondingly high fees to independent individuals with lower hourly rates.
“When dealing with third party advisors, you usually get what you pay for,” says Fersht. “However, we have seen situations where enterprises have paid top-dollar for third-rate advice and others where customers received great service from one of the smaller, cheaper firms.”
A large, well-known consultancy may be a good option, but don’t make the decision based on name recognition alone. Now more than ever, there are great lower cost options available, thanks in large part to experienced sourcing advisors who were laid off during the economic downturn and who are now in business for themselves and, as such, available at a large discount to you.
3. Get personal. You hire a consultancy, but you work with a consultant. “The individual advisor in charge of the project is at least as important as the firm,” says Kimball. “The (best) firms all offer good people, sound methods and a wealth of experience, but individual chemistry between advisor and client is crucial.”
Adds Matlus, make sure you’re not getting stuck with the rookie.
4. Check-and double-check-those references.You’ll want to talk directly and discreetly with multiple clients of your prospective sourcing advisor who are at least a year into their negotiated outsourcing deals. They’ll be in the best position to tell you whether the advisor’s guidance was worthwhile. The best references, as always, will come from people you know and trust.
“References from enterprises not put forward by the advisor are even more valuable,” says Fersht. “Try networking with peers at other companies who have experience working with outsourcing advisors.”
Make sure the references you talk to were involved with the consultancy at the start, or better yet, are those who’ve had experience working with the individual professional who would lead your process, adds Matlus.
5. Test drive the tools. Take a close look at the processes and methodologies the advisors use. The advisor should have a proven approach for taking enterprises through the outsourcing lifecycle.
“Ask them specific questions on how they applied it in previous client cases and how they would work with you during each stage of the cycle,” says Fersht. “You will learn a lot about how much they have thought through your issues when asked how they will apply their methodology to your specific situation.”
The better the advisor’s tools, says Matlus, the better and more expeditious the sourcing process will be.
But don’t forget about the need for flexibility, as well. “Look for the ability to vary usual methods to suit circumstances and client needs,” says Kimball. “One size does not fit all, especially now.”
6. Investigate conflicts of interest. There’s no doubt that you want an advisor who engenders respect from the vendor community, but when consultants get too cozy with providers, you lose.
“They must be focused on your best interests, not theirs,” says Fersht. “Investigate other business divisions and service lines within the advisory firm to ensure where their interests lie. Also prod them about their relationships with outsourcing vendors to make sure you’re getting an independent view of the market.”