Some of our consultant competitors are all about dispassionate cost cutting in their outsourcing RFP processes, treating office services outsourcing as a commodity. But the only people being hurt are you the customer, as these companies force suppressed wages on the staff that do the work, resulting in higher turnover, mistakes, low morale and service levels failure.
Of course in today’s environment, cost cutting is critical for non-revenue generating support areas and every reasonable cost cutting measure must be explored, and unfortunately, because the vendors earn margin on every person, every piece of equipment they provide, they have a dis-incentive to cut costs in your outsourcing contracts. But don’t compromise everything to save a few dollars that could end up costing you in the end by reducing these services to a mere commodity, like office supplies or library services.
What some of my competitors will do as their primary strategy in their RFP processes, is pit an incumbent vendor against one or two others in a competitive bidding scenario, but rather than letting the competitive bidding scenario drive pricing via market conditions, these companies come up with arbitrary “savings” targets they claim are based on benchmarking, but it really isn’t, as office support services is an organic, operational service, not about the old “bodies and boxes” theme. How the services need be provided depends on a number of operational nuances and your culture, not just benchmarking. Do these companies understand that? I think not.
The result of these scenarios, is the client finds a new vendor willing to essentially absorb the incumbent vendor’s personnel at below market rate, thus reducing costs, but with two very negative by-products:
1) The “winning” vendor ultimately writes a deal that is barely above costs because they can’t in practicality reduce the incumbent employees’ salaries to the level of the consulting company’s arbitrary targets—so the vendor’s margin shrinks.
2) Secondly, the incumbent vendor’s staff are now paid less, with less benefits, to do the same work, which is not only bad for them, but bad for the industry in general as it will prevent good talent from pursuing careers in this field, resulting in lower employee standards, poorer quality work and ultimately, to you the client, mistakes and service failures. It could lead to outsourcing of the labor pool to these outsourcing companies, now competing for lower cost temporary staff to fill the inevitable staffing void, which in the past has had mixed results at best.
All it takes is one late package, mis-delivery, lost FEDEX and bungled copy/print/scan job that can mean the difference between making a filing, losing a case, or worse, a client. Is it worth it?
What’s the better solution? The combination of sound procurement procedures in a competitive bidding process AND the understanding of the operational and people elements of servicing to forge a reduced-cost but still functional solution that is a win-win for the vendor and client alike.
Whoever is telling you that it no longer necessary to have a win-win scenario between you, the client and your vendor, isn’t likely going to be around six months after your new contract when it collapses. By then, the predatory consulting firm will be long gone on to another client repeating this process.