The Outsourcer's Advisor
Firm: TPI, Inc., Houston, TX
• Founded: 1989
• Specialty: Outsourcing consultants
• No. of consultants: 130 "advisors"
• No. of employees: 180
In tough economic times, companies are looking for ways to cut IT budgets, including through outsourcing. Houston-based TPI, Inc., has made its mark helping companies determine what part of their business to outsource and which outsourcer is best for the job. Not surprisingly, business is hot. Revenues grew 42 percent last year and 60 percent from 1999 to 2000, and Chief Executive Officer Dennis McGuire is "strongly considering" taking the firm public in 2003.
McGuire formed the company in 1989 after six years at then–Andersen Consulting's outsourcing group. His strategy involves not only helping the company pick the outsourcer, but also helping manage the relationship during the contract. The firm assists clients with the evaluation, negotiation, implementation, and management of sourcing transactions.
"The average (outsourcing) deal is seven years," McGuire explains. "Given the pace of change in the world, with most deals within three years, there's a need to renegotiate all of it. In most cases, we help them do that process as well."
McGuire says that services like TPI's are needed as outsourcing deals are becoming more complex and resembling many aspects of a merger as tax, legal, HR, and even environmental issues are raised. Companies involved in outsourcing deals are increasingly global, and speed to market is tightening.
TPI works almost exclusively with global 1000 companies with outsourcing deals from $50 million to $10 billion. The firm bills its clients on an hourly basis instead of a percentage fee. "That would incent us to do a bigger deal," McGuire says, and considering that most outsourcing deals take six months to negotiate, TPI's fees can add up quickly. But McGuire says that the savings generated for clients are 20 to 50 times TPI's fee, "so the cost justification is relatively easy."
With change and deregulation driving outsourcing adoption, TPI is seeing the most activity in the financial services, pharmaceutical, and utilities industries. Manufacturing has also been hit hard, so TPI has been an outsourcing advisor to several auto manufacturers and consumer product companies.
Looking ahead, TPI expects to grow its new energy management outsourcing practice and expand its business in Europe. "There are more, bigger energy outsourcing contracts than IT outsourcing contracts, especially in Europe," McGuire says. TPI also plans to tap into its existing client pool for cross-selling opportunities, which McGuire likens to "razors and razor blades."
"Once you get that first deal, they're always adding scope, expanding it to more parts of the world."
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