Consulting and Procurement Transformation — Hiring the People, Not the Name

At Iasta's event last week, I was struck by how much the provider had transitioned their model from nearly all application software -- in a SaaS format, mind you -- to becoming a mini-me version of AT Kearney Procurement solutions. Yes, you read that correctly. Iasta, which we all previously thought of as an e-sourcing vendor with a few functional add-ons here and there, looks more like a comprehensive services/solutions firm than it does a software company today, especially considering that their current growth engine in percentage terms is primarily services revenue (despite 20%+ quarterly year-over-year growth in software, which is not too shabby, I might add). Moreover, much of this services growth is not coming from short-term strategic sourcing projects but rather full-blown procurement transformation initatives (yes, again, you read that correctly).

I had the chance to talk to a couple of Iasta's resources in the procurement transformation area and what I discovered might surprise you. These are, in fact the same high caliber people -- in fact, more senior than most -- you’d find working for big name providers. But rather than tolerate 3x mark-ups on their time as contractors for others -- or as full-time employees -- they're working with Iasta because they get to keep more of the receipts for themselves. And Iasta is billing them out at what appear to be significantly lower rates than what some of their big name competitors might charge for nearly identical assignments.

To me, this is further proof that when you hire a consulting firm (be it as big as IBM or as small as a one-woman shop), you need to place significant emphasis during the evaluation phase on the individuals that will be carrying out the scope of work described. As more and more talented consultants and advisors become free agents in the operations and sourcing consulting world -- not to mention setting up their own boutique shops -- the benefits of many of the bigger name firms are beginning to erode (not to mention the pyramid structures they often employ that rely on younger MBAs and college grads to do the bulk of the work). All of which reinforces my new advisory adage: hire the people, not the name. And still, if you insist on going with the branded option for procurement transformation or other areas, make sure you're getting your money's worth by asking them to quantify and guarantee some aspect of the results and/or put significant skin in the game.

Jason Busch

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