London: A new report released today from specialist research group Source Information Services says that over two thirds (69 per cent) of procurement managers are now strongly influencing the purchasing decisions of large consulting projects — those worth more than €500,000.
- Procurement plays increasing role in buying big consulting...but then disappears
- Big Four firms dominate Tier 1 preferred supplier lists (PSLs)
- Getting on a PSL is as important as ever for winning major management consulting projects
However, for all the talk in recent years about procurement widening its remit, the report also found that whilst procurement managers are heavily involved in negotiating on contracts and fees, they disappear completely as soon as the project starts.
Procurement's disappearing act...
80 per cent of procurement managers are rarely involved with assessing the performance of consultants during a project, a number that jumps to 86 per cent in respect of post-project involvement.
Edward Haigh, Director from Source Information Services says, "Despite the assertions of procurement managers that value, rather than price, is of paramount importance in consulting projects, it seems that once a consultant starts work, that's the last most procurement departments will see of them. That may not be the fault of procurement managers but it certainly represents a failed ambition."
Getting on PSLs is also as important as ever for management consulting firms.
Amongst organisations which spent more than €10 million on consulting in the last six months, 70 per cent have a PSL for consulting suppliers. And consulting firms on a PSL win about 78 per cent of the total value of all consulting work in an organisation.
But the report says that the good news, both for consulting firms and clients, is that PSLs aren't, on the whole, closed shops, though they're more so for Tier 1 firms than they are for Tier 2.
How firms get on...and stay on PSLs
To get on to a PSL, a Tier 1 firm needs to be winning lots of work, to stay there it needs to show how good its work is. Tier 2 firms, on the other hand, need to assure people about the quality of their work to get on to a PSL but the critical thing in keeping them there is to win lots of work.
Procurement's view of the top tier — means Big Four
The tier in which procurement managers believe a firm sits has an important bearing on the success of that firm in winning work.
Almost two thirds (59 per cent) distinguish between the tiers when appointing firms to their PSL and half make the distinction in terms of the way firms are presented to end users.
For many procurement heads, Tier 1 appears to mean the Big Four. Amongst this group, Deloitte sits top — with 90 per cent considering it to be a Tier 1 firm. The report says that the firm has been especially successful in establishing its reputation amongst procurement departments. It sits ahead of KPMG (86 per cent), with Ernst & Young and PwC (81 per cent) tied in third place.
There's then a gap, followed by what is, arguably, the most intriguing piece of data in the chart. McKinsey is considered by two thirds of procurement managers to be a Tier 1 firm, which leaves a third who think it isn't. This, the report concludes, tells us a lot about the nature, and risks, of specialisation.
Haigh comments, "PSLs may not be everybody's idea of the most intelligent way to go about organising consulting spend but they appear to be here to stay. What's more, for firms on them, particularly in these straitened times, when growth in consulting is not easy to come by, they offer huge potential to those firms who make the cut. Investing time in building relationships with procurement, and in understanding how procurement see your firm, is time well spent."