Make-or-buy for consulting services 101
When you launch a project, you should always check first if you can use Internal resources. Because it often means keeping the costs at a minimum and optimizing the use of your internal skills and resources.
Make-or-buy for consulting services 101
But this option can very quickly reach its limits if the project team is not given the appropriate time and responsibilities to lead the project efficiently.
“Making good decisions is a crucial skill at every level. ~ Peter Drucker
Moreover, because the leaders of internal projects are often high-potentials on the leadership fast track, they find it challenging to push boundaries and confront the more established leaders and influencers who hold the key to their careers.
Assigning an independent task force can bring focus, speed, and pressure to the table, which is sometimes enough for the success of a project.
Consultants are selling their time, or more precisely, the access to expert knowledge and execution workforce during a certain period. The potential of production of a Consulting is the amount of time available for billing.
1. Simple steps to solve the Make-or-buy dilemma –
Most companies and their procurement function work to optimize their external spend and their pool of suppliers to better support the overall strategy. They have developed methods for answering a variety of difficult questions:
What are the key activities that can be outsourced?
What does the pool of potential suppliers look like?
How mature is the market for suppliers?
What providers are appropriate for us?
Is it worth it to outsource a particular activity for the long term?
The same questions apply to Consulting Procurement. Unfortunately, most companies have neither the experience nor the methods to answer them. Yet, today, all leaders throughout an organization, from the head of procurement to senior executives responsible for signing off on major consulting projects, are expected to align their activities with the enterprise’s overall strategy.
2. Helping executives make faster and smarter decisions when buying Consulting services –
When it comes to making decisions about consultants, executives often fall back on word of mouth, on perceptions of the reputations of various providers, and the fancy claims of the consultants themselves. Also, they take the line of least resistance and simply hire the consultants they have used in the past, regardless of whether those consultants are the most appropriate for a particular project or furthering the company’s broader strategy.
These leaders have no reliable way to determine whether a particular consultant precisely meets the company’s needs, no way to gauge a consultant’s likely level of performance, and no benchmarks against which to compare providers. And until they avail themselves of an independent, credible means of assessing providers and matching them to their company’s needs, they are likely to lag their competitors who have.
3. Advantages of using External consultants –
Because they are very familiar with the problem, these Consultants can usually solve it more efficiently and at less cost than Internal resources. They can also make up for the lack of internal resources and flexibility that prevents internal personnel from being diverted from their regular jobs.
How can your company utilize the expertise of Consultants?
Clients may also want to use consultants for broader purposes than the project itself. These could include training executives on new skills, introducing external change agents, learning best practices in the industry or a capability, exposing the organization to a fresh perspective, or relying on the stamp of a recognized consulting brand to reassure board members or investors.
But even under those conditions, hiring external consultants is not always the best solution. For example, consulting services that meet your needs may not be available in your industry or country.
On the other hand, leading an internal project can be tricky. The internal team may be unaware of the latest trends in the industry or capability. They may waste time reinventing already well-established improvement methodologies, resulting in longer projects and higher overall costs. Again, the fact that the team members are part of the company can make it difficult to disrupt the established order.
4. How to get one step further?
And maybe to achieve the best performance, we need to look at the middle. A middle path can bring you the best of the two worlds: a hybrid execution. There might be parts of the projects that can be isolated as stand-alone workstreams, where confidentiality or service availability will not be a challenge. Under the direction of a highly experienced project leader, you can outsource parts of your projects and keep the rest in-house.
Besides, it’s critical to monitor your budget, and centralizing the Category will provide that capability. Some companies have responded to what is mostly a ‘Make-or-buy’ dilemma by centralizing Consulting procurement. The aim is to have a more global vision of consulting efforts, better understand the costs, and more powerful levers for negotiating volume discounts and creating synergies across functions and business units. Recognizing that Consulting is an accelerator of change, these companies make Consulting Management the head of Strategy or a Transformation leader. Generally, putting the accountability of the Consulting Budget and, therefore, the monitoring of the Consulting Expenses, close to the group in charge of the strategy, is the right move. This team needs to define what are the rules when procuring Consulting Services. Demand management, Make-or-Buy strategy, and Consulting Spend analysis should go through them to ensure alignment with the overall strategy and their consistency across the board.
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