Once a Rare Breed, advisory firms focused on the outsourcing space have now become ubiquitous. Their role has also seen significant expansion from operating on the periphery of the industry to becoming an important player the outsourcing community.
As outsourcing becomes commonplace, and as offshoring gets treated as a strategic initiative, there are increasing instances of older deals running into trouble. So much so that much of the outsourcing deals in 2006 were “re-structured deals” rather than fresh deals being signed — a clear indication that outsourcing customers have matured.
What's more, corporations are under pressure to get their outsourcing programs right at first strike as it is more expensive to walk out of a bad contract than not outsourcing in the first place. A bad program can cause a huge drain to an organization's financial resources prompting many organizations to bring back programs in-house. Sainsbury's bringing back IT operations from Accenture or JP Morgan bringing back IT operations from IBM are cases in point.
Given the pressures to make their outsourcing strategies work, organizations have increasingly turned to this band of advisory firms that specialize in outsourcing for information about service providers and their global delivery capability. They also engage them for end-to-end consulting services, from conducting internal audits and streamlining processes to drawing Request for Proposals (RFPs) to vendor selection, drawing SLAs and monitoring the transition process.
More than a third of the outsourcing contracts have been handled under the guidance of these firms. Forty-seven percent of such deals are being executed under the guidance of sourcing advisors, according to a study by consulting firm, Orbys Consulting.
Sourcing managers who have led successful outsourcing programs openly acknowledge their success to such sourcing management consultants. Jack Farkas, Director of Business Process Outsourcing at $3.9 billion (2005) Texas-based Trinity Industries who led the organization-wide implementation of Oracle Financial said that they engaged BearingPoint to help them manage the transition of processes.
Before contracting any advisory firm, clients must ensure that these advisory firms do not have financial relationships with services provider.
What's a Boutique
A boutique outsourcing advisory firm either works within a large advisory firm or works as an independent small and specialized consulting firm. Explaining their role, Dr. Paul Roehrig of Forrester Research says, “These firms are smaller practices groups that work within a big group. They help in outsourcing strategies to develop those programs, build contracts, build RFPs, negotiate deals and pricing and all components of an outsourcing deal. Some of them help in implementing deals as well.”
These firms can be classified into two categories. “You could either be a boutique advisory within a large advisory firm, or you could be an independent small, specialized firm,” says Pradeep Udhas, Global Head, Sourcing Advisory, KPMG.
These firms have deep process knowledge related to all aspects of outsourcing. Firms like TPI, Everest, EquaTerra, Morgan Chambers, neoIT, provide information about service providers, help clients draw RFPs, select vendors and extend their services to post-contract services and managing outsourcing engagements. Deloitte, McKinsey, AT Kearney, Bain & Company, Boston Consulting Group, Booz Allen Hamilton, PricewaterhouseCoopers, are among those advisory firms that have traditionally provided advise on IT and business management, but now are also involved in consulting in the niche area of outsourcing.
There are also some firms that are typically services providers, but also offer consulting, business transformation and other change initiatives, for example, IBM, Accenture and Capegemini.
Global technology and related services spending crossed $1.5 trillion in 2006, growing at 7.7% over the previous year indicating increasing business opportunity for boutique outsourcing advisory firms, according to Nasscom , India 's association of software and services companies. In 2006–2007, Tholons, an investment, advisory and management firm for global outsourcing of business, knowledge and IT processes, structured $960 million worth of outsourcing deals while Pace Harmon supported its clients on deals in excess of two billion dollars.
