Two other steps that often come under scrutiny are the request for proposal (RFP) development phase and the proposal response phase. Most advisory firms and many companies already have templates for requirements, and these can be used as a starting point for the development of requirements. Your team can review and customize these templates with the advisors guidance, so you do not need to start from scratch. However, this process can typically take several weeks, depending on the availability of your team and your starting point. If you have not solidified your scope and strategy before you start writing the RFP, you will spend another several weeks getting these items clarified before you can start writing the RFP.
Here are three key areas that can be eliminated or optimized.
- Eliminate the Request for Information (RFI). If you are comfortable with your requirements and are ready to select and identify a few providers who can deliver those requirements, the RFI step can be completely eliminated. To help you shave several weeks from the process, a competent advisor can help match service providers’ capabilities to your requirements without having to issue an RFI.
- Eliminate Site Visits. A week or more can be shaved from the project schedule, and considerable expenses can be saved if you skip this step. If you are working with experienced, reputable service providers, you should not need to send your entire team to visit their site. Site visits are always carefully orchestrated, mostly by marketing and sales people who do not usually represent the service you will be receiving or the team you will be working with. If you really need to do the site visit, schedule this trip after you have eliminated all but the one or two providers you want to work with, or think about combining the onsite visit with the review of the bidders’ proposals. Instead of having the providers come to you for the bid reviews, your team can go to their site.
- Optimize Onsite Due Diligence. Do not eliminate due diligence, but do optimize it. Managing multiple providers onsite is logistically difficult and can extend the length of due diligence if not carefully coordinated and orchestrated. The biggest time waster in due diligence is data gathering. Perhaps the biggest difficulty in data collection is simply a delay or lack of focus on the part of the people collecting, organizing and reviewing the data. To streamline, the client can start data collection in the early stages of the sourcing initiative, and provide all data to the bidders through online mechanisms. A carefully managed, well-documented due diligence will provide clarity and remove risks from the bids, and can be completed with one or two providers in one to two weeks, depending on scope. If your sourcing requirements include the takeover of resources, facilities or people, you may not be able to avoid some onsite due diligence, but you can optimize it by planning carefully and doing advance work. Eliminate any delay in getting the data to the service providers, and you will reduce costs and save time in the process. Require your sourcing advisor to provide your team with data collection requirements early in the process and request early input from your service providers. Dedicate a small team of people to the task. Begin early and organize.
Can you automate the process?
There are many tools available to automate parts of the process — from the data collection to development of the RFP, and some that manage the process of receiving the bids. In addition, most advisory firms have already developed templates as a starting point for the development of requirements, and these can save you a considerable amount of time in this effort. In sharing and customizing documents, make use of collaboration tools to optimize your team’s efforts. If your advisory firm does not have a set of tools to optimize the process, you should use your own. Sharepoint, eROOM and Basecamp are just a few of the collaboration tools which can facilitate the process. There are also a number of eProcurement sytems available, which can facilitate the bid delivery, but will not automate the rest of the process. Running a complex strategic sourcing initiative on paper is not only antiquated, but time consuming and expensive.
How do we keep down the cost of external labor?
The use of outside advisors is a critical part of outsourcing. Unless you have a very experienced internal team, you will want to hire that experience for both the business and legal guidance and insights. But how do you keep the costs of external advisors down to a reasonable amounts. First of all, hiring expensive advisors may not seems like a good thing to do when you are pressed on your budget. However,the experience of most is that the advisor, when used appropriately, can bring excellent value to the table, prevent costly mistakes, and help you achieve your business goals. Here are a few hints for keeping the costs down:
Develop a strong, dedicated internal team, and carefully define what you expect the advisor to do. Most advisors are fully capable of running a complex outsourcing transaction and providing a majority of the administrative, technical and legal support required to complete the transaction. This is certainly easy, but very expensive. You can easily incur upwards of $1m in advisors fees working this way. Have the advisor work collaboratively with your team. Ask the advisor to act in a coaching capacity, bringing its tools, templates and best practices to bear on the project. Your team will need to be tasked with doing the heavy lifting.
Ask the advisors to identify ways in which they can provide a useful service, while keeping the costs down. We do not recommend trying to negotiate a fixed price advisory agreement. The level of effort in an outsourcing transaction is dependent on many factors, most of which are controllable only by your team, your environment and the third parties you engage with. The advisor, particularly if acting in a coaching role, cannot promise deliverables for a fixed price. You can however, buy their services on a retainer basis, or buy a fixed number of hours. Negotiating a fixed price agreement is likely to get you the "junior" team -- which will not be particularly helpful to you.
Lastly, don't just buy the cheapest resources you can find. We recommend you get the services of the most experienced advisros you can find and challenge them to coach and facilitate your team through the transaction. You will save money in the long run, avoid costly mistakes and delays, and get a long term relationship off on the right footing. As an added bonus, you will have a team that clearly understands the deal and can manage it through transition and steady state.