Purchasing Consulting Services: What’s so specific?

Key Takeaways

You’re paying for the consultant’s knowledge and experience.

Unlike buying a tangible product, purchasing consulting services involves various elements which makes it difficult to identify what you want to assess or how you’d define the RFP straight immediately.

The negotiation part differs a lot in consulting services. It isn’t the same for all. The true value lies in the scope and what sort of consulting firm you want to work with.

The thing we need to consider in consulting is that, besides the report, there is value in working with a top tier consulting firm, which is similar to goodwill on the financial sheet.

If an organization has a large budget for consulting, they l often tend to disregard the sourcing and negotiating aspects.

Mature procurement organizations have increased the emphasis on the impact and value generated.

Transcript

Hello and welcome back to Smart Consulting Sourcing, the only podcast about consulting procurement.

I am Hélène, and today we will discuss what’s so specific about purchasing consulting service. However, before that, let me give a recap of last week.

The top consulting firms are those that consistently deliver exceptional results for their clients. They’re the ones who have a track record of success in helping businesses achieve their goals.

When searching for the top consulting firm to solve a specific problem, it is important to consider what that problem is and what kind of consulting firm would be best suited to solve it.

It’s a no-brainer that everybody wants to hire the best consulting service providers. However, your idea of the finest consulting partner may differ from that of your competitors’. You must develop your criteria based on your project needs and goals.

Listen to the complete podcast about, what is top consulting firm?

However, this week, I want to discuss about, purchasing consulting service: what’s so specific?

You’re not just buying a product or service when you hire a consultant. You’re paying for the consultant’s knowledge and experience. And, as the title implies, “What’s so specific?” Apart from the consultant’s knowledge and skills, nothing is!

The consultant’s role is to assist you in resolving your issues, whether it’s refining your company operations or developing new marketing strategies for your items. They also help you in achieving your objectives more efficiently since they have particular knowledge and skills.

So, when talking about purchasing consulting services, there are four unique aspects to look at:

The first is the intangibility, which makes it difficult to identify what you want to assess or how you’d define the RFP straight immediately.

The fact that while writing a Request for Proposal (RFP), you need to consider various aspects , adds to the difficulty.

Purchasing consulting services is not like buying a simple item like a table. When you buy a table, even if the dimensions and the material and the color are different. It is still a table.

So while procuring such products, it is very easy to compare the proposals on the technical aspects and the commercial aspects.

However, while purchasing consulting services, it is possible that it will be radically different from previous services. And everything you’d expect to see in an RFP, from the high-level goals to the deliverables, schedule, team makeup, and so on, will be dramatically different. As a result, nearly nothing can be reused! You’ll have to start from the beginning.

The other thing that’s specific is the impact on the company.

The end result of purchasing consulting services is that you are expecting something, maybe it is a problem that you’re trying to solve with a consultant having expertise in that area, or you’re trying to improve your business process, or building up the team efficiency whether it’s in the top line or at the bottom line. You’re expecting an impact!

And this means that, employees, stakeholders; people in general will be impacted at some point. So, there’s a change management component that has to be added at the very beginning of purchasing the consulting service. If you fail to do so, you might compromise the success of the initiative you want to launch!

Next part is the negotiation,

Negotiation and comparison are two abilities that individuals utilize often in everyday life. When someone is looking to buy a table, for example, they will haggle over the price with the seller. To do so successfully, they will compare the table they are interested in with other tables of similar sorts to see if the pricing is reasonable.

When it comes to consulting, though, it’s like comparing apples to oranges! Because you’re comparing more than just the service; you’re comparing what’s on the inside, their approach, and the methodologies they’ll employ. And this distinguishes it because when you buy a tangible product, it won’t matter to you how it’s made or anything. But when you buy a consulting project you care about almost everything.

And the last portion, I believe, is about where the true value is when purchasing consulting services.

Many procurement professionals believe that when purchasing consulting services, the area where you should concentrate your efforts is on the negotiating and cost-cutting aspects.

But the reality is that anytime you buy something intangible, whether it’s consulting or not, you’re buying something you cannot count or measure. It might be a legal, marketing, or other intangible service.

The portion where you actually save money is in the scope! Because you’re purchasing time and expertise from skilled consultants, no matter how big or little your project is.

So, anything you put in your scope will define how much time you’ll need, how much experience you’ll need, and what kind of consulting firm you’ll need to execute the task, and that’s how your fee will be calculated!

Identifying the right consultants for your project is critical to ensuring that you obtain the most value possible at the end of the process.

Now, let’s pretend Team A is McKinsey and Team B is a local second-tier business when we talk about other consulting companies. There is an almost 50 per cent variation in daily prices. As a result, the sort of company you examine will automatically determine the value.

So, the thing we need to consider in consulting is that, in addition to the report, there is value in working with Team A or Team B, which is similar to goodwill on the balance sheet. This isn’t mentioned in the report or the contract, but it’s a perk you get as a customer when you engage with top-tier businesses.

So, where to focus your efforts?

When you look back on how you spent your budget the previous year, you invariably come to the realization that you should have spent more in one area, less in another, and definitely not on some initiatives.

Concentrating efforts on a small number of high-impact initiatives generally produces far more value than sugar-coating a big number of lesser ones.

Many companies delegate purchasing consulting services to the executives who require it. In this instance, the executives are normally focused on scoping and supervising the project.

And since the company usually has a large budget for consulting, they will often disregard the sourcing and negotiating aspects.

And the procurement will focus on (and struggle to) organize a proper competition and negotiate lower prices at the back end of the process.

However, mature procurement organizations have increased the emphasis on the impact and value generated. Those companies are also employing demand management to ensure that they invest where the most value can be made.

As a result, their emphasis is on picking the right initiatives, finding the right consultants, and managing them throughout the project to optimize the impact.

In Conclusion,

When it comes to purchasing consulting services, it is an important part of any company’s business strategy. This can be difficult, with many companies choosing one extreme or another when it comes to how they approach these contracts- some treating them like any other transaction while others blindly following principles regardless of their unique situations.

However there are still best practices that all firms should follow so as not only make sure your investment pays off but also reduce risk involved in doing so.

So there are a few things that you need to remember when buying consulting services, you’re purchasing more than just the service; you’re comparing what’s on the inside — their approaches and methodologies. When you buy a tangible product, it won’t matter to you how it’s made or anything, but when you buy consulting, you care about almost everything.

So it is not entirely true, because now procurement leaders tend to care more about how a product is manufactured, and look at the sustainability, but I think you get the drill.

And that marks the end of our podcast. Next week, I want to talk about how to build the right consulting agreement? So, stay tuned.

Till then, stay safe and happy sourcing!

If you have other questions about purchasing consulting services, remember you can always contact me directly on LinkedIn or by email because I am always game for a chat!

Bye and see you next week! Au revoir!

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