{"id":1208,"date":"2013-10-20T15:24:00","date_gmt":"2013-10-20T15:24:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/traditional-outsourcing-advisory-is-dead_102013\/"},"modified":"2013-10-20T15:24:00","modified_gmt":"2013-10-20T15:24:00","slug":"traditional-outsourcing-advisory-is-dead_102013","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/traditional-outsourcing-advisory-is-dead_102013\/","title":{"rendered":"Traditional outsourcing advisory is dead."},"content":{"rendered":"
\"\"<\/p>\n

Who's feeling disruptive today?<\/p>\n<\/div>\n

Why do so many service providers still hover feverishly around outsourcing advisors begging and willing them to invite them into huge contracts… when the reality is that most maturing enterprises are today less reliant on the advice of traditional consulting than they ever<\/em> were? \u00a0And when will advisors wake up and realize that the old method of billing their clients millions for effort-based grunt work is just no longer doing it for them?<\/p>\n

As one advisor confided the other day… “we can tell in a quick phone call if we can bill them $500K plus… if we can’t, we just don’t bother pursuing them”. There was little thought regarding how to develop a long-term outcome based relationship, the onus simply being to park the MBA bus at the client’s visitor’s parking spot and sell the same old dog n’ pony show of cranking out operational data to effect the sort of operational result that the client really should do itself. \u00a0Bottom-line, clients need a helluva lot more than the obligatory 200-slides appendix that quietly gets dropped into the recycling bin after gathering dust on some executive’s desk for a few weeks.<\/p>\n

And when the world’s number 1 management thinker,\u00a0Clayton Christensen, writes about\u00a0Consulting on the Cusp of Disruption<\/a>, you know it’s officially game-over for the way consultants have traditionally delivered effort-based high-cost projects for wizening clients. \u00a0And when it comes to helping clients with Global Business Services and Outsourcing, the credibility of consultants is at an all time low – according to 106 C-levels and SVPs \u00a0of major enterprises responding to our new GBS study:<\/p>\n

\"\"<\/a><\/p>\n

Click to Enlarge<\/p>\n<\/div>\n

Why do only half of enterprise leaders see increased investments in consultants as the way forward to achieving effective global business services?<\/span><\/strong><\/span><\/p>\n

Yes – just look<\/em> at the data – increasing investments in consulting scores\u00a0drop-dead last<\/em> when it comes to achieving fluid and effective governance. \u00a046% actually sees\u00a0no benefit whatsoever<\/em>, and only 15% sees any real help coming from outside.<\/p>\n

Compare this to the fact that over nine-tenths of enterprise leaders look to stronger C-Suite commitment, better talent and better IT to achieve their governance outcomes. Clearly, if consultants could help ensure their clients could begin to achieve<\/em> these three objectives, they would find themselves sitting near the top of the priority pile, instead of at the bottom<\/em>.<\/p>\n

How has consulting reached this low-point and what can be done to turn the corner?<\/span><\/strong><\/p>\n

Let’s refer to Clayton Christensen first:<\/p>\n

\n

We have come to the conclusion that the same forces that disrupted so many businesses, from steel to publishing, are starting to reshape the world of consulting. The implications for firms and their clients are significant. The pattern of industry disruption is familiar: New competitors with new business models arrive; incumbents choose to ignore the new players or to flee to higher-margin activities; a disrupter whose product was once barely good enough achieves a level of quality acceptable to the broad middle of the market, undermining the position of longtime leaders and often causing the \u201cflip\u201d to a new basis of competition.<\/p>\n<\/blockquote>\n

And the world of outsourcing advisory fits right into this trend, where, in years gone by, the likes of TPI (now ISG) would park teams of former EDS executives into enteprises to number-crunch outsourcing contracts and FTE cost-data for millions of dollars. \u00a0Other advisory boutiques sprang up to take advantage of this model, such as EquaTerra (now part of KPMG), Alsbridge, Everest, W Group and Pace-Harmon. We then saw traditional consultants, namely Deloitte, PwC, KPMG, Ernst and Young and even McKinsey, form “outsourcing advisory practices” to grab their own share of the pie, as clients queued up for help with their global sourcing needs. \u00a0However, as all of them quickly discovered, all the easy<\/em> money was centered in the act<\/em> of brokering a deal, crunching the numbers, vetting provider long\/shortlists and working with lawyers to finalize the contracts. \u00a0Most were quickly ejected after the contract was signed, as they simply didn’t have the right consulting skillset – or data – to support the client with its operational and strategic needs to transition the operating model and develop a fluid, effective governance capability.<\/p>\n

Some of these firms have flourished to evolve their models to provide platform-based solutions which enable client to access process benchmarking data, dynamic pricing information, on-tap support when needed, but most have persisted in hawking the same-old model that half the clients – as the data points out – are not really<\/em> looking for anymore.<\/p>\n

As brokering outsourcing contracts has become operational – and commodotized – these consultants have been faced with three stark choices:<\/p>\n

1) Just do deals cheaper.<\/strong> \u00a0Today, we see deals that used to involve teams of six (or more) consultants, now being brokered by one solo advisor. Go figure. We are also seeing outcome-based models from non-traditional consultants, such as UpperEdge<\/a>, that do not rely on the onsite hourly-bill-fest consultant model to broker a transaction and can radically undercut their higher-priced competition with its strong data and pricing capability. \u00a0Alsbridge<\/a> has been one of the few smaller advisory boutiques to survive in recent years, developing a strong competency in IT infrastructure and networking data benchmarks that enable it to take the lead in a commodity market and service clients with low-cost support, in addition to traditional outsourcing advisory, based on its client needs.<\/p>\n

2) Persist in finding clients na\u00efve\u00a0enough to pay 2005 prices.<\/strong> \u00a0Sadly, there are still some enterprises which still get convinced they need the MBA bus dispatched to number crunch an ADM bake-off between HCL, Cognizant and TCS. \u00a0Yes – seriously – this still<\/em> happens! \u00a0Traditional consultants, such as Deloitte, PwC and Ernst and Young have stayed in business doing it the old-fashioned way, and do a good job leveraging their long-established auditing relationships to get to the table with clients, still happy to pay top-whack for the peace-of-mind of using a reputable brand. \u00a0ISG<\/a> (formerly TPI) is the traditional 800 lb gorilla of the complex and clunky outsourcing transaction, and has made efforts in recent years to position itself as more<\/em> than a transaction shop dependent on the $550\/hour gray-haired former EDS executive-cum-consultant rolling up to camp in a cube somewhere at the back of a mid-west shared service center for the next three years model. \u00a0While it has made some interesting efforts to change its business, such as its recent multi-year contract with Marriott to manage its outsourcing governance program, the firm still makes the bulk of its business from the old world of traditional advisory. \u00a0Whether it can eventually transform itself into a research \/ benchmarking firm after its acquisition of Compass<\/a> three years’ ago, remains to be seen.<\/p>\n

3) Develop platform-based capability that decouples the requirement for onsite consultants, while providing clients with the data and capability they need.<\/strong> \u00a0We are starting to see pockets of this happening, such as the work KPMG has done developing its Governance Workplace tool that provides clients with ongoing process benchmarking, industry insights and pricing data to manage its service provider and shared services portfolios, supported by a dedicated onshore delivery team in Grand Rapids, Michigan. \u00a0The firm has done an impressive job developing the IP and technology acquired from EquaTerra<\/a> and coupling its governance consulting talent to its clients, as and when they need it, under its Managed Governance Services offering. \u00a0While it’s still early days to gauge the long-term potential of KPMG’s model, it’s clearly a front runner in terms of balancing clients’ needs for traditional consulting with the disrupter product that is acceptable to the broad middle of the market<\/em> which Christensen talks about.<\/p>\n

The Bottom-line: Consultants are not immune in today’s disruptive world – it’s “change the model, or prepare to fizzle-out” time<\/span><\/strong><\/span><\/p>\n

I’ve never known a more disruptive time for business than today – entire industries can be decimated before they know it – just look at the impact social media and the proliferation of information and communication has had on PR, research, media, technology and content-provision. \u00a0Many once-great great brands \u00a0have faded (or become extinct) because they failed to keep up with the changing needs of their markets, preferring to stand still and hope their brands carried them through… well, if Clayton is correct, the same is about to happen right at the front door of outsourcing advisory.<\/p>\n

Smart clients are losing their appetite to invest in expensive consulting models that only deliver effort-based inputs. \u00a0So much of the information they had to pay millions for in the old days can be found in LinkedIn groups, or served up for free by eager BPO firms seeking to develop client relationships. \u00a0The onus is shifting to arming clients with ongoing data, analysis, insight, support and knowledge to help them empower themselves to be more effective. \u00a0Clients want to improve their own<\/em> talent, not just hire it in for a piecemeal project, which goes away when the money runs out. \u00a0The issue is that traditional consultants are only schooled one way – to price based on bodies and effort, as opposed to outcomes and sustainable longevity. \u00a0They will obviously claim they provide their clients with those outcomes, but when those clients can start to achieve the outcomes they need from less costly and more flexible, relevant models, then the game is up – and the old world has to change.<\/p>\n

Like any other industry, change only comes about then the actual fundamentals are shaken and the “old way” of getting paid changes. \u00a0As the data clearly indicates, traditional advisory, as we knew it, is on that very cusp in the global services world. \u00a0Those consultants who fail to change their ways, bring in leaders with new ideas and new models for IP delivery, or hire innovative consultants who are not always from the other traditional consulting shops, are surely about to go the way of the Woolly Mammoth…<\/p>\n","protected":false},"excerpt":{"rendered":"

Who's feeling disruptive today? 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