Co-Sourcing for Professional Services

Often the road to building a new, more consultative offer or capability in a captive PS business is a significant stretch for the current business processes, methods, and frankly, the talent. Also, sometimes building a captive PS business from scratch – at least one that is to accomplish more than implementations – is a similar challenge. This blog, and those to follow, explore the idea of co-sourcing to develop a consultative business from scratch or develop consultative capabilities in a captive PS business.

What is the difference between the typical captive PS businesses and a more consultative business?

A consultative business usually solves issues more aligned with executive issues. As a result, the activities are more varied than implementation offers and managing client executives through the process is different. This requires a different set of skills and business processes.

Let me first say that this is by no means a statement or belief that the current PS people cannot perform in a more consultative business; the challenge, and the benefits of co-sourcing are about time-to-success and getting all the mechanisms in place for continued success.

What do we mean by co-sourcing?

Co-souring (in this case) means having a Partner that has the experience in building captive consultative businesses – and therefore can help build the business. Most companies aim to fully take the consulting business over at a specified time or when certain criteria have been achieved, but a few companies have the Partner continue to manage the business indefinitely.
We have found that co-sourcing in a captive PS business is a new thought, and it was originally proposed to us by an executive that hired us in four different companies helping them build the PS business. This executive came to believe it would just be faster with less trouble to have us manage the business through the build-to-success phase. Through that process we learned that there are many requirements for the more consultative business or offer, including the ability to:
1. Build Service-Chains,
2. Build Account Pathways or Journeys,
3. Hire, train, and coach consultative type resources,
4. Launch operating mechanisms,
5. Develop and stand up training programs, etc.

There are instances when developing a properly operating consultative PS offer, practice, of business calls for a faster, more predictable program than building it organically, and less risky than acquiring an existing capability. In these cases, co-sourcing (having an experienced group build, manage, staff, sell, deliver the new business, practice or offer) is an interesting and viable alternative.

A few examples of this are:
1. PS wants to add an outcome offer to its portfolio but has several challenges in becoming successful quickly enough to meet business objectives. These challenging decisions/actions could include:
a. How to build outcome-based offers,
b. Which offers should built,
c. How to price the offers, and most important
d. How to sell, deliver, and manage the client through the delivery of the offer.

2. PS is currently a hodgepodge of talent and offers and the company wants to quickly move to a best practice business.

How is co-sourcing financially managed – how does the contract work?

The pricing for this type of relationship is usually based around covering direct cost with risk sharing success payments. Risk sharing lowers upfront investment and both parties on same side of financial models. But, for any risk sharing partnership to work both organizations financial incentives must be aligned and paying success fees should be celebrated not treated like the black-death. In following blogs, I will dive into this idea more detail. You will find it takes many of the concepts we have discussed in other topics but from the point of view of having a Partner do the heavy lifting.


Written by: Dean McMann

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About the Author: Dean McMann is a Founding Partner at McMann & Ransford with 35+ years of experience in consulting and professional services.  He is a sought-after expert and speaker on topics of: B2B differentiation, professional services best practices, and overcoming commoditization.  In addition to his extensive experience in the Professional Services space, Dean also serves on the board of various non-profit organizations.

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