If you are involved in the outsourcing industry in any way, you undoubtedly have had some level of interaction with sourcing advisors — third-party intermediaries acting on behalf of buyers to facilitate sourcing transactions. They perform upfront due diligence, helping companies, governments, nonprofits and educational institutions decide whether or not to outsource; how/if to make internal-process improvements and to facilitate other transformational issues.
If an external sourcing option is chosen, the advisor guides buyers through the outsourcing process, start to finish. They are experts at business operations (including financial modeling); have an in depth knowledge of the process, domain and globalization; can select the right service providers for the right function and have perfected the art of sourcing down to a science with deep methodologies and proven processes.
Sourcing advisory services have existed for many years, but have gained real momentum in the past decade, when outsourcing contracts became more comprehensive and global in scale. The demand for sourcing advisory services will continue to grow significantly, as the appetite for outsourcing continues and picks up in certain parts of the world and the processes become more robust.
There are an assortment of sources from which prospective buyers seek sourcing advice — from internal sourcing teams to external consultants, lawyers, outsourcing events, magazine content and from the outsourcers themselves, as illustrated below (See Chart 1).
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Categories of Sourcing Advisors
There are five major categories of firms that currently dominate the sourcing advisory services market. They are:
“Pureplay” or niche sourcing advisory services firms. Pureplays have the most significant presence in this marketplace in terms of revenues generated on advice surrounding the outsourcing process. They have the deepest process knowledge and client base related to all aspects of outsourcing, shared services and offshoring. Some of these firms even manage outsourcing engagements post contract such as TPI, EquaTerra, neoIT, Morgan Chambers, Everest and Compass.
