I cannot stress enough how helpful it is to involve a sourcing advisor in the FAO process - especially with regard to transition assistance, risk mitigation and governnance - but there are many challenges to consider before engaging an external consultant:
You may be able to get through the sourcing lifecycle solo. Working with a consultant is expensive. It's invasive. It's time consuming. All prospective suppliers will give you advice on what they think you should/should not do anyhow. You or your peers may have outsourced in the past and/or have a good handle on what your internal state is and where you want it to be X years down the road. Or your organization may be culturally adverse to hiring third parties. Rational or not, all of these perspectives must be considered.
Sourcing consultants are “billable,” for the most part, paid on an hourly basis, so they are not incented to get the deal done quickly and may prolong the process. Some consultancies charge fixed or cap rate fees for certain phases of the sourcing process, with rewards for achieving agreed-upon milestones. Most times, however, consultants (and suppliers) are constricted by customers’ behavior – their ability and willingness to make timely decisions – so advisors generally stay away from fixed fees for situations that may be out of their control.
Some sourcing consultants have overly rigid methodologies, so much so that they strip out supplier’s potential to demonstrate innovation or a “value add” that may otherwise have come across to prospective customers. Also, the very important, intangible, relationship factors, such as likeability, culture and operating philosophy, cannot be exhibited fully within these confines, thereby reducing prospective buyers’ abilities to judge suppliers’ packages appropriately.
Some sourcing consultants have been accused of showing biases by recommending certain suppliers repeatedly, of accepting bribes from suppliers (although uncommon) or other unethical business practices, so it is incumbent upon prospective buyers to perform due diligence appropriately to work with a skilled, well-reputed firm that they can trust.
Many FAO suppliers feel that they get less input into the sourcing process when an advisor is involved and often have little room for input directly to the buyers. This is not good, especially since the advisor is only there for a short part of the lifecycle - the buyer & supplier have to "live together" hopefully for a very long time. So initial trust building can be hindered. This applies to the larger, well-known advisory firms as well as the lesser known consultants in the FAO domain. And to the lawyers - some have contract templates that are overly long and ultimately of no value over the long haul.
ALL OF THIS SAID...the best incentive for sourcing consultants is to earn referenceable clients and repeat business, so in most cases, they work diligently to overcome all of these challenges. Just take note of these potential obstacles, as you would before you dive into any major investment with the goal of a positive return.
Although this post is not FAO or outsourcing related, I wanted to share with you a link that a dear friend just sent me - http://www.youtube.com/watch?v=2A2Jt4WOxN8&feature=related - that's gotten nearly 6 million views. Sadly, the singer of this melody, Israel Kamakawiwo'ole from Hawaii, died at age 38 of weight-related respiratory complications.