Sourcing For Services, Inc

Market Changes Shine Bright Light on MSP Landscape

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TOP 5 REASONS Money Is Left On The Table (full article from newsletter)

Even experienced business professionals are routinely tripped up by common pitfalls when talking to service providers who are looking for their business.  It is easy to see how this happens.   Professionals are knowledgeable in their own specific business area, but not typically experts in all aspects of their business such as hiring a team of consultants, finding a corporate travel partner, or evaluating a back office outsource provider.  This lack of expertise in identifying, engaging, and negotiating with service providers not only jeopardizes the success of the underlying project or business problem, but can cost businesses more up front in the form of "money left on the table."  Since this is an article on saving money on vendor selections I will not venture into the other inherent risks involved with inexperienced sourcing which can include unfavorable contract terms and lack of quality resources or capabilities, etc.  However, these risks are real and can sometimes be more costly than poor selection and negotiation.

The top 5 reasons money is left on the table when companies engage service providers are:

1. False sense of dependency on incumbent vendors
2. Poorly defined service request or requirements
3. Engagement terms structured in vendor's favor
4. Initiation of work without a contract 
5. Lack of options (competition) from multiple, truly viable vendors 

To read more in-depth descriptions of these pitfalls, see the SFS Blog.

Too many times business leaders unwittingly engage vendors without a clear strategy or desired end state in mind.  Perhaps they don't have a sourcing professional they can partner with or they simply opt out and prefer to go it alone.  It happens all the time, not just in small to mid-size companies.  Ask any services procurement professional at a Fortune 500 company, "What is the primary reason for such high lost savings opportunities in professional services?"  "Lost savings opportunities" is procurement-speak for describing money left on the table.  Those procurement professionals, including myself prior to starting SFS, will confirm that too much money is left on the table because corporate managers and executives hire the third party vendors themselves, resulting in significant, unnecessary premiums.  Services procurement professionals, like SFS, know how to counter these pitfalls, avoid premium pricing, and assist clients in selecting the best vendor for their service needs.  

What makes these pitfalls so harmful to businesses (ie why so much money is left on the table) is how skillfully some vendors lead their prospective clients directly into them.  Yes, to some vendors these common pitfalls are actually "sales tactics."  However, there is a way to avoid these mistakes and turn the vendor's business development process around to better serve the client's needs.  

Editorial note: I do not fault vendors for this practice.  They are doing what they need to do to develop business.  If a client hires them at premium rates and allows work to start without a contract in place, is it really the vendor's fault? Let's reverse the situation.  For example, a company leverages SFS expertise to engage a vendor at a deep discount governed by a deliverables-based contract that holds the vendor fully accountable.  Is that unfair?  No, that's just smart business... for the buying company. 

Sourcing For Services has the sourcing experience and expertise necessary to avoid these and other pitfalls. We consistently deliver high quality sourcing outcomes and save clients 15% - 30+%. SFS is so confident in our ability to save clients money, that we guarantee a savings of 5-10X our clients' sourcing investment, or our services are free.  Whether you are interested in hiring us to support your service vendor requirements and selections, or you are trying it yourself, give us a call to discuss how we can help you not leave any money on the table.

Michael Matherly,

SFS Founder and President

Top 5 Reasons money is left on the table (abbreviated)

1. False sense of dependency on incumbent - I have never had a request where there was only one firm that could do the job.  Even if the incumbent did phase 1, 2, and 3 that does not mean that they should just be 'handed' phase 4.  There are ways to either prevent this scenario or position the client company for implementation phase leverage.
2. Poorly defined service request or requirements - If you are even remotely familiar with the dismal success ratios of IT projects, then you are familiar with this reason.  It all boils down to GIGO.
3. Engagement terms structured in vendor's favor (so that they are not held accountable for overages or failure to deliver) - Most of the time this is due to inexperience of the hiring manager or requester.  If you don't negotiate service engagements on a regular basis, then you are most likely going to miss some basics of contract writing and negotiation. 
4. Work starts before agreement is signed - Some might say you get what you signed up for.  (Get it?  If the vendor starts work before a contract is signed, should you really expect anything? What could you hold the vendor accountable for, contractually?)
5. Lack of options (competition) from truly viable vendors - If there is no real threat of losing the business, then why should a vendor concede anything? If you had 2 bids from 2 different vendors and they were completely identical in all respects except one was priced 30% less than the other, would you select the higher price bid?  No, of course not.  So why would you expect a vendor to just give you money?

The Sourcing Center @ SFS not only helps you avoid these pitfalls, but turns the table on vendors and saves you money.

The Sourcing Center @ SFS Meets Growing Need For Indirect Savings

GREENVILLE, S.C. - Sourcing for Services Inc. is a new firm that helps companies find and engage quality professional service firms at guaranteed savings. The company also has a consulting arm that helps larger companies develop services procurement functions and capabilities internally. The core business of Sourcing For Services, though, is a managed service offering known as The Sourcing Center @ SFS. This business delivers high quality sourcing outcomes directly to small- to mid-size companies with at least $50,000 in projected services spend. The Sourcing Center @ SFS helps companies identify, select and negotiate with vendors for their professional service needs. Professional services are those services that companies seek from external vendors such as audit and accounting functions from CPA firms, legal support, management and IT consulting, benefits administration, corporate travel, engineering services, janitorial, etc. The Sourcing Center is an on-demand service provider and can be engaged for even a single transaction or service need. 

Michael Matherly, SFS founder and president, says that his service provides a strategic advantage for companies seeking to remain competitive in today's tighter economy and position themselves for long-term viability. With direct costs of goods and service delivery already pressured to the limit, businesses are seeking out new ways to reduce operational costs. With a services procurement mindset garnered from his time at Capital One Financial, a Fortune 200 company, Matherly built The Sourcing Center to be performance-based - "just like I would have wanted to see if I were still in corporate procurement managing the professional services category," he said. SFS guarantees a 500 percent ROSI (return on sourcing investment) for each sourcing transaction. He added, "Our pricing policies reinforce to our clients that we succeed only when they succeed. That's how business owners want their vendors to partner with them today." 

"Reducing indirect costs - such as professional services, corporate services, finance and accounting functions - is a great way to preserve margins," said Matherly. He added, "However, most companies have not considered this option or at least have not figured out how to do so effectively and efficiently. That's where The Sourcing Center comes in: We help clients make an immediate, positive impact on the overall cost of external service providers." 

The company also partners with staffing managed service providers (MSPs) to serve the high spend, high volume needs of larger clientele. 

Speaking directly about the MSP channel, Mr. Matherly said "This service allows managed service providers to expand their services footprint, augment existing tool functionality, and deepen the value-add of their client relationships. The Sourcing Center works in tandem with their existing tools and processes to provide human-driven sourcing advisory services to drive better vendor selections and deeper savings for the client. Partnering with staffing MSP's and back office solution providers is another way for us to take part of an already positive outsourcing trend in today's business environment. We are excited about the prospects of this new channel." 

ABOUT SOURCING FOR SERVICES: Sourcing for Services was founded in 2009 by Michael Matherly, based on his more than 16 years in the corporate and consulting arena - including 12 years with Capital One Financial Corp. In addition to The Sourcing Center, SFS provides consulting services to help mid- to large-sized companies analyze and assess services spend and to develop internal services procurement, sourcing and supplier diversity functions. 

Contact: Michael Matherly at TheSourcingCenter@SourcingForServices.com or call (888) 730-7374.

Sourcing For Services, Inc, 209 N Main St. #433, Greenville, SC 29601

My post to LinkedIn Group Indirect & Services Spend

Getting consulting spend under control is all about changing buying behaviors in the organization. And the reason consulting is usually not on procurement's radar is because there are sometimes hundreds of different buyers/decision-makers of consulting services throughout the bigger (Fort 1000) organization, making behavior modification quite difficult. In other words, it is easier for procurement to focus on bigger spend categories where there are only a few decision-makers - IT hardware, paper/print/postage, software licensing, real estate, etc. Makes sense really, until the economy or your business turns south and you are forced to look to indirect/services spend for additional savings. There is no quick fix for getting consulting spend under management, unless of course you have a CFO or other c-level exec that is willing to drop the hammer to make it happen. But, if the CFO was that interested in this spend and has a hammer dropping management style, then I suspect he/she would have instituted disciplines long before now and the spend would not be so out of control. This is not an uncommon situation at all, it is a normal part of the procurement maturation process. Controlling consulting spend takes time, patience, thick skin, a streamlined process truly based on business need, great customer sourcing service, grounded analytics, reportable data, a savvy internal PR approach, some kind of control point with the AP / PO system/process, and at least some executive air cover for those in the procurement trenches working to do so. It doesn't have to take 3-4 years like it did me, but getting it totally under control and starting to deliver some strategic sourcing benefits will take 12-18 months or more. There is no 'easy button' for this one. If you have no process or tool in place right now, then it is critical to put something, anything in place to get you in front of at least a few SOWs. And when you do get those initial chances, you need to deliver at the transaction level. Then you need to tout the savings and the diversity of solution options your competitive sourcing process produced. In other words, you need to sell your services, sell your value-add every step of the way. You have to convince and show managers, decision-makers that they will benefit when they engage you BEFORE they engage the vendor. They won't believe it until you show it to them. Don't forget about turnaround time: $100K consulting engagements can't take 30-60 days to source. No matter how much savings pleasure you can deliver, it will not compare to the perceived pain of a long, bureaucratic process. Strategic sourcing of professional services (ie significant savings) cannot be achieved until you have put the basics in place, primarily an effective engagement model between your internal customers and you. Once you have that problem solved, then all the cool stuff that us procurement professionals like to do - volume build, supplier consolidaiton, strategic vendor management, category consolidation or restructuring, rate card negotiations, etc - will actually work. Trying to go strategic without the proper blocking and tackling is a classic cart before horse situation and ultimately may do more harm than good. Not to mention drive you nuts. Take it from one who learned the hard way. ;) Good luck, Howard! Let me know if I can help. Michael

see full discussion http://www.linkedin.com/groupAnswers?viewQuestionAndAnswers=&gid=2080051&discussionID=5066618&goback=.anh_2080051