Companies having few hundred thousand to few million dollars outsourcing budgets would certainly go and hire an outsourcing advisor to build a strategy and help them on innovation, negotiations, delivery, vendor selection etc.
When we asked, what could be few reasons for a (services buyer side) company that has approved outsourcing budgets but still want to stick with same service provider with no new strategy; and when they know that an outsourcing advisor can come up with good options, proven strategies and workable solutions?
Some experts shared their experiences and insights.
Michael Filak (Independent Outsourcing Consultant):
There may be many reasons for this to happen. From my experience (and to over-simplify), the two largest are:
1) They are happy with the service and the relationship with the outsourcing service provider (and if they are happy, they should absolutely stay with the current provider);
2) If at all possible, they don’t want to go through the hassle of transitioning from one service provider to another (or to take it back in-house).
The second one above is interesting in that I worked on a deal many years back for a re-compete of a very large ITO deal. The client had made it known to the incumbent service provider and publicly that they were not happy with the current service provider. After the re-compete, the challenger was 10% less expensive than the incumbent and just as strong solution-wise. The client chose to stay with the incumbent because they just didn’t want to subject the organization to a major upheaval.
This really only pertains to contracts where the scope and technology remains the same. If that is not true, then I believe it is imperative that they test the open market. That said, it doesn’t mean, in my opinion, that they absolutely need to hire an advisor. It’s possible they have people on-staff who can function in that role. In fact, the internal advisor is a role I played while at Cigna and we had no need to go outside to run $50M or so outsourcing procurements.
Finally, let me echo this sentiment from a previous response: “too many advisors have no idea what they are talking about”. So true! And, I just don’t mean the small independent advisors.”
Michael Filak is a multi-talented sourcing “business creation” and strategic sourcing executive driving shareholder value for multiple top-tier IT services and consultancy firms. Onshore/ Offshore/ Nearshore specialist, globalization expert and visionary strategist.