External sourcing advisors have become critical business partners for buyers, with FAO Research estimating that upwards of 65% of prospective buyers of full-scale, enterprise-wide FAO services come to the table with the assistance of an third-party advisor.
Why Might You Hire One?
The process of procuring business services, especially those that are finance related, is unlike procuring hardware, software or consulting services Prospective outsourcing buyers generally lack a solid understanding of the outsourcing process and FAO service providers to make the best decisions alone. They also may not have the project management skills, or time, needed to evaluate the sourcing option and make potential transactions happen successfully. Often, they are just "too close" to their current situations to envision a desired future state.
A research study I conducted via Ross Research (before selling out to EquaTerra in 2004) proved that skilled sourcing consultants can help save more money than prospective buyers actually will pay to hire them.
- Sourcing advisors can help companies save 6-10% of costs relative to the cost of in-scope services prior to outsourcing.
- Companies that used a sourcing advisor got a payback on their advisor's fees through cost savings (relative to the cost of in-scope services prior to outsourcing) within six months or less, sometimes in only 4-6 months.
- Most companies achieved the business results they expected by using a sourcing advisor.
What Benefits Can You Expect?
Here are some reasons why prospective FAO buyers have used sourcing consultants - and some benefits they received - instead of navigating the complex sourcing process solo:
- Mitigated risk
- Leveraged Outside Expertise
- Instilled a disciplined process
- Got objective input
- Supplemented insufficient internal resources
- Used advisors previously
- Got the lowest supplier pricing
- Took advantage of their industry knowledge
- Clarified objectives and developed a sourcing strategy
- Better negotiated terms and conditions and service levels and metrics.
- Used tried-and-true process methodologies and tools & templates
- Negotiation and transition assistance
- Shorten the sourcing process
You Also Can Expect Some Challenges
Before making the decision to enlist a third-party consultant which, btw, is a very expensive proposition, be sure to read my next post which will focus on some challenges you might face when working with an external sourcing advisor.
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