How to Best Define Your Consulting Procurement Strategy
by Hélène LAFFITTE
February 25, 2019
Strategy Consulting is very often mentioned as the focus of consulting activities. What very few people know is the share of pure strategic work is now below the single digit. Global Consulting Market is now growing at a high single-digit rate when pure strategy work is flattish. So one can wonder how are all those global corporations spending their consulting budget? Surprisingly, despite Consulting being used by more and more executives every year and budgets representing up to 3% of turnover, the Consulting category itself and how the company is indeed spending its consulting budget, is very rarely looked at in a structured way.
The essence of strategy is choosing what not to do. – Michael Porter
We should probably start with a definition of Procurement Strategy –
A successful Procurement Strategy for the Consulting Category requires a good understanding of the overall Strategy, the Consulting Market and the past performance within the category. It has to be in line with the Procurement Guidelines, and custom-made to Consulting.
We have reviewed below the ‘pillars’ that can produce effective outcomes, and pitfalls to try to avoid.
Feel free to apply what suits best your specific vision and policy
1. Your Consulting Strategy
Halfway between Strategic planning and Demand Management, one of the overlooked levers is to define a Consulting Strategy.
This Consulting Strategy aims at identifying the key projects or project areas where using consultants will accelerate your strategic objectives and create the biggest impact. Once defined and planned over a period of 12 to 24 months the consulting strategy will help in guiding the teams towards the key actions supporting your strategy, and alternatively will indicate areas where a lower effort should be engaged.
Pitfall – failing to provide a proper time frame, delegating extra effort or human resources to projects that are smaller, or not enough resources, can backfire.
2. Choosing Between Make-or-Buy Strategy
Defining a Make-or-Buy Strategy is another key step in establishing the Procurement Strategy for the Consulting Category.
The Make-or-Buy Strategy is very closely linked to Demand Management, and both matters should be (re)evaluated altogether.
The goal here is to come to an improved, more effective decision-making process, often including a decision framework and a decision matrix.
This framework allows deciding what projects should be prioritized and what is the best execution model for each project.
As an example, think of a major transformation exercise for an insurance company across all sites in Asia to implement new development methodologies inspired by the lean startup and the scrum principles.
The consulting firm could provide all resources for the project, or you could decide to implement a hybrid team mixing external consultants and your own in-house scrum masters.
Pitfall – Missing out on fees’ reduction due to the inadequate decision process, weak buy-in from the teams, and uneven knowledge transfer from external firms.
3. Your Preferred Supplier List & Master Service Agreements
One of the Strategies that can be extremely efficient in Consulting, like in other categories, is to build a Preferred Supplier List.
It is based on the fact that 80% of your needs are usually covered by 20% of your Suppliers. You can anticipate what Suppliers will be engaged, when and how, by looking at both your past Expenses and the strategy for the years to come.
With these “Preferred” Suppliers, you can start negotiating Frame contracts, or Master Service Agreements, including pre-agreed terms and conditions and volume discounts.
Pitfall – not having clear expectations, or deficiency in the list of Preferred Suppliers can affect the projects’ success in various ways.
4. When and How to Integrate a 2nd and 3rd Tier Consulting Firms
It can be quite beneficial to leverage 2nd, and 3rd Tier Consulting Firms (small to mid-sized) to decrease the average costs and cover the niche and/or very operational needs from your business lines, and help you get control of the Tail Spend while optimizing the ROI.
Pitfall – Do not miss out on identifying specialized niche providers who can deliver excellent performance at lower rates, that other general providers won’t.
5. Your Consulting Procurement Process
If you can’t describe what you are doing as a process, you don’t know what you are doing. – W.Edwards Deming
To set the process on the right track, you can start with RFPs. They are an amazing tool for buying Consulting Services. You should always write an RFP, even a simplified one. Why? Because it sets expectations like the scope and the deliverables.
In that specific case, writing an efficient RFP will maximize not only the performance of the procurement but also the chances of success of the project.
You might also want to segment the projects based on the size, the strategic importance, the potential impact and/or the complexity to define what will be the process: RFI or not, simplified RFP or not, competition or not, procurement support or not.
Pitfall – Make sure you leave room in your RFP to the Consulting Firm to bring innovative ideas and approaches. Lack of clarity in your expectations and the criteria of evaluation in the RFP, might not produce the best proposals.
And as a final piece of advice, once you have identified your preferred Consulting Firm, do not forget to formalize the agreed expected deliverables, terms and conditions in a separate Statement of Work (SoW).