August 09, 2012, 2:10 PM — At a going rate of $350 per hour and up, IT outsourcing consultants don't come cheap. If IT leaders aren't careful, the cost of third-party assistance in setting up an IT services deal can quickly spiral out of control. And that's not even counting the attorneys' billable hours.
While it may be unlikely that IT executives would set up a major outsourcing deal without third party consultation—at the very least, to incorporate current market intelligence and pricing—there are ways to cap consulting costs.
"Although many larger consulting firms talk about their unique process and wealth of experience, the dirty little secret is that they are just skilled temporary labor," says Adam Strichman, founder of outsourcing consultancy Sanda Partners. "The moral of the story is that it can be done with fewer consultants, if you have internal people to dedicate to the effort 100%."
Here are nine tips for reining in the consulting fees on your next outsourcing engagement.
1. Set Clear Expectations "I have come into situations where people have milked the request for proposal (RFP) process and it is unfortunate," says Mark Ruckman, outsourcing consultant with Sanda Partners. "The customer and consultant need to be clear up front about expectations and timing before the RFP process begins, otherwise you will have scope creep and dissatisfaction." Expect a simple, straightforward deal to take about a month, mid-size deals two to take three months, and deals of $500 million or more to take four to nine months.
2. Lose the busy bodies An outsourcing contract will require two to seven full-time professionals. Most IT shops can't afford to lose that many folks for long, so in come the consultants. However, only one or two of those are actually skilled IT services professionals, says Strichman. "The rest are just skilled busy bodies assembling financial information. The majority of what they do can be done by anyone." Consider taking care of that in-house. "Many people have dealt with IT outsourcing issues by now," Strichman says. "Even mid-sized companies usually have internal folks with a wealth of experience, if you can find them and redirect them."
3. Take Control When Honorio Padron was an outsourcing customer, he was a fan of the "lift and shift" model. "Give it all to the consultants and then give it all to the outsourcers. But 80% of those deals have suboptimal performance," says Padron, now the global business services practice leader at the Hackett Group. "There aren't the right incentives or knowledge in place." Padron advises putting an internal employee in charge of the outsourcing selection process and making a subject matter expert from the business the project manager. "Just sprinkle the consultants into two areas—deal making and legal," says Padron.