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:
- False sense of
dependency on incumbent vendors
- Poorly defined service
request or requirements
- Engagement terms
structured in vendor's favor
- Initiation of work
without a contract
- 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,
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