July 05, 2023 | Procurement Software
Consulting services can be a valuable asset for enterprises, but they can also be a significant expense. Managing consulting spend is a vital part of the procurement process. Controlling this cost effectively becomes a significant milestone, especially in challenging economic times when cost reduction is a priority. That's why it becomes imperative for procurement leaders to have a clear understanding of their consulting spend and to put in place processes to manage it effectively.
One of the primary challenges organizations face in managing consulting spend is the decentralized nature of purchasing and usage. Multiple business units across an organization often procure consulting services, each according to its individual budget and without visibility into similar requests or the organization’s agreements with consulting partners.
Further, many enterprises lack a consistent policy governing interactions with consultants or external talent. This results in ambiguity between contingent/temporary labor and consulting projects. Poor visibility into completed projects can result in repetitive engagements, addressing already solved business problems, leading to unnecessary expenditure.
To effectively tackle these challenges, enterprises should consider a consulting control tower approach. This strategy involves the close involvement of the procurement team to centralize spend management, enhance collaboration, and establish consistent guidelines for engaging with consulting partners.
The consulting control tower strategy is based on three key pillars:
Establishing specialized consulting partner panels across key geographies and business areas enhances buying power and meets business needs effectively. Collaborating with business leads helps build a commercially viable panel, improving collaboration and outcomes.
A robust policy and strong leadership support ensures compliance and maximize value. A consulting review board (CRB) could be established to approve requests above a specified spend threshold. Early procurement involvement provides valuable market insights, promoting efficient contracting.
A joint business partnership model ensures finance, procurement and business work closely together, supporting the overall business strategy. A category-based planning approach can optimize engagements, promote upfront visibility on emerging engagements and provide market insights from procurement.
These pillars together form a governance framework, enabling cross-organizational visibility and efficient decision-making with leadership support. In mature organizations, the integration of approval and policy governance with sourcing and purchasing results in a clear reporting portfolio.
The control tower approach delivers significant benefits to organizations. By playing a significant role in risk mitigation, it turns policies and vendor engagement into actionable items, minimizing risk at the source. The control tower also enhances consulting procurement, resulting in higher addressable spend and savings.
Adopting a consulting control tower approach can effectively navigate the complexity and variability of consulting spend. It ensures governance, transparency and a proactive approach toward spend management and compliance. By integrating data and technology, the control tower fosters an informed, responsive and ethical procurement process, aligning with broader organizational goals and transforming the approach to consulting procurement.
To control and manage consulting spend effectively, it is crucial to centralize management and governance, enhance collaboration and establish clear guidelines. By adopting a control tower approach, organizations can not only achieve these objectives but also align their procurement activities with their overarching business goals and financial objectives.
To know more, download our bulletin Consulting Services Spend: How To Unlock Value With a Control Tower Approach