Procurement outsourcing: The Indian Perspective

We've all heard about procurement outsourcing from the perspective of companies considering it in the West. But what about examining the issue from the angle of those engaged in actually doing it? Unfortunately, that's an too seldom told story. But the good news is that the Hindustan Times recently took it upon itself to examine procurement outsourcing from an on-the-ground perspective in India.

What's fascinating about the article is that it goes past examining what we expect in most procurement outsourcing arrangements -- indirect category outsourcing. It also explores outsourcing in direct materials, providing an example about how Corbus is working with GE Aerospace in the direct materials arena. Of course this requires a different type of talent from IT and call center outsourcing -- and even indirect outsourcing, for that matter. The authors jokingly note that "if the business grows, demand would grow for engineers, certified purchase managers and other agents whose skills are qualitatively different from the smooth-talking, fake-accented post-teen women who started the BPO revolution about a decade ago."

I personally find the concept of direct materials outsourcing fascinating, especially considering few are actually offering such services today (I've gotten on Ariba's case many times in person for not making a more aggressive play on the direct outsourcing side here, since it's such a natural for them given FreeMarket's direct material roots and the significant direct materials expertise they have on the consulting side). In the case of global sourcing, outsourcing direct materials spend -- including sourcing, supplier performance management, and supplier development -- to a local provider makes a ton of sense. After all, you can save money and work with local providers in the process.

Need an example? Consider how "Corbus has a $100 million 10-year contract from General Electric Co (GE) to manage supplies for customers like Boeing for which GE makes aircraft engines. Increasingly, giants source as much supplies as possible from the best and the cheapest wherever they are on the earth—and procurement is a complex puzzle in the game." And given this, doesn't it make sense to work with outsourced partners who are, in fact, closer to the suppliers you're working with than you are?

Jason Busch

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