Consulting tail spend: how to take control

Key Takeaways

More and more client organizations realize the importance of managing the consulting tail spend.

There are a few levers that they can use to manage your consulting tail spend: gather information about their expenses and the performance of their providers, regroup projects to capture synergies and savings, explore the consulting market, clarify the rules for consulting tail spend management and use a vendor management system to track small projects.

Transcript

Hello and welcome to episode 26 of our podcast: Smart Consulting Sourcing, THE podcast about Consulting Procurement.
My name is Hélène, and I’ll be your host today.

Each week I’ll give you the keys to better use, manage and source consulting services. This week, I’ll discuss about How to take control of the consulting tail spend?

Last week, I explained How to get started to improve your consulting sourcing capability?

We saw clarifying the expectations, better defining the process and spending on the most important projects can get you a long way and improve your bottom line.

What is the consulting tail spend?

Tail Spend Management is a well-known source of savings for Procurement groups. With the constant pressure on cost reductions and sustainable savings, many companies are starting to notice their consulting tail spend, even in the Consulting Category.

Indeed Companies tend to neglect the small consulting tail spend, contracted directly by the business line managers.

However consolidated at the Company level, they can represent up to 25% of the Consulting tail Spend. Not much you might say. But when the Consulting tail Spend can be 0.5% to 3% of the total revenue, any savings on this front can significantly improve your bottom line and delight your CFO.

Manage your consulting tail spend

To efficiently clean up your consulting tail spends, here are a few pointers:

– Gather data on the previous projects.

The main challenge for most companies when facing the tail spend is to clearly identify the projects in the tail and cluster them into manageable sub-categories. If your organization is decentralized, you will need to get the support of the different parts of the organization to make sure that you have “clean data.”

If you haven’t performed a spend analysis, maybe now is an excellent time to launch it.

– Assess the performance of the providers.

Interview the project sponsors and leaders to identify high- and low-performers.

– Regroup what you can.

Recurring and duplicate projects are good candidates for strategic management and should not be treated as the tail. How about a frame contract on coaching or a cross-business-unit RFP for excellence programs or digital transformation?

– Develop your knowledge of the local Consulting Market.

An excellent way to keep control of the tail without spending too much time on the management is to have at hand a list of additional providers. By exploring the local Consulting Market, you will be able to identify potential suppliers and develop relationships.

That will allow you to be reactive when one of your business lines wants to launch a one-time project on a given sub-category.

– Fine-tune the rules for the tail projects.

To maintain your tail spend reasonable, and make sure you are not building up another false tail, you need to set up workflows with the right agile check and balance and chase the false tail.

– Use vendor management systems.

Use best-in-class systems to manage the one-off supplementary workforce. Automate the process to find, procure and manage external talent in full compliance with your policies.

There are many other levers you could use, but the above selection should probably give you a good 80/20. We decided to spare you the tail of the tips.

That’s it for today. Next time, I’ll answer the question Why should you develop an internal consulting group?

In the meantime, if you have any questions, or want to learn more about what we do at consulting quest, just send me an email at helene.laffitte@consultingquest.com

You can also have a look at our website smartconsultingsourcing.com to know more about our book and download free templates & guides to improve your consulting sourcing.

Bye and see you next week! Au revoir!

Useful Links :