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Jun 27, 2007

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Hey Jag. Good to see old friends on this blog. (Hope you all come over to Facebook soon. Would love to "mashup" my old community with my new.) Jag's comments reminds me of Upton Sinclair's, "It is difficult to get a man to understand something when his salary depends upon his not understanding it." New millennium interpretation? Short engagement. Phil's and Michael's comments are elucidating. I've learned something here. Thanks!

Well written and commented. How many advisors really challenge the strategy for outsourcing rather than diving into the "sourcing" process. I suppose, the sourcing process makes money for the advisors (employs junior people for a longer period of time) rather than engaging clients in a strategy discussion (requires strategic thinking, experience, inteligence and articulation) that risks short engagement!

Too many deals have gone wrong (or are limping to finish line) thanks to "sourcing" advisors taking "half baked strategy" and coupling with "iron clad" sourcing terms (I know of one contract with over 100 critial SLAs with penalties).

JD

Michael,

It's really a game of horses for courses, as each company is unique and will select an advisor that will help it achieve its goals. If it has made an outsourcing decision and only wants transactional support in getting its deal done - then it could choose an advisor that can do this at reasonable cost and has a record of getting good contract terms and pricing.

As the outsourcing issue becomes one of the top agenda items for most CFOs and CEOs, it's a natural progression for the big consultancies to jump on the bandwagon and build practices. While the expertise necessary to run assessment models, supplier evaluations and facilitate contract negotiation is possible to reproduce, the new "secret sauce" is the skillset to advise on the business strategy around outsourcing - both in terms of helping clients make sound sourcing decisions, but ultimately in terms of providing actionable and accountable guidance to help clients implement sourcing engagements successfully. That means the successful advisors will ultimately be those that have the deep experiential and strategic resources across all phases of the sourcing life cycle. Moreover, becoming a trusted, long-term confidant of the corporate decision maker that has their interests at heart, is crucial.

Do I see this as the beginning of the end of pure-plays? Not necessarily - like any complex business strategy consulting function, the key to success is to evolve with client needs and differentiate oneself from the rest by having superlative competences - and having client references to support this. Those that fail to evolve will likely drift away, but those that focus, differentiate and develop their expertise, will likely survive and prosper.

PF

Phil all fair points and agree with the concept that clients need to engage advisors for total lifecycle rather than just the selection/contracting element.if we accept this premise then moves the advisor role firmly into the broader consulting space who have the capabilities,breadth and depth to support.Do you see this as the beginning of the end for some pure play sourcing advisors?

Hi Susan,

It's easy to point the finger at the advisors who worked on deals that eventually failed, however, if these guys are brought in to help select a supplier and get a deal done, it's hard to hold them accountable for deal failure that is more than likely to have occurred due to poor governance over operations and a breakdown of relationship with the supplier - IF the buyer chose not to retain that advisor's services to assist with the transition and relationship management. The crux of this post is the point that the buyer needs to make their advisor accountable by having it more closely involved with their entire sourcing lifecycle. Hence - buyers need to be more engaging with their advisor, BUT the advisor needs to position services and prove its expertise post-transaction to prove it is worth keeping around.

One other reason for deal failure is that the earlier wave of outsourcing deals were very much a "venture into the unknown" for all parties involved: advisors, providers and buyers. Today, we all have learned from past mistakes to be more robust with SLAs, contract management, and - most importantly - our expectations. The diligence being demonstrated in many of today's outsourcing deals is - in most cases - far tighter than seen a few years' ago.

PF

Hey Phil. Just felt like dropping in over here. Question-- has anyone held the leading advisory firms accountable for all the blockbuster megadeals that have fallen apart over the years? Probably shouldn't meddle in an area I've been conspicuously absent, but your post here provoked my inquiry. :-) Good to see the blog! S

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