In late July, IBM announced that it was refining -- perhaps expanding is a slightly more exact term -- their overall procurement outsourcing strategy. Purchasing magazine covered the basic news at the time quoting from the press release by noting that IBM added "new strategic sourcing services and new procure-to-pay services" to its PO offerings." In short, IBM is further breaking out its procurement outsourcing capabilities with this news, trying to get a foot in the door to potential customers by positioning smaller chunks for them to initially bite off (which will hopefully, in their minds, be washed down by some blue-tinged Kool-Aid in the process).
IBM's Bill Schaefer, whom I later spoke to about the issue, hints in the article that these new offerings will, perhaps, have more appeal to procurement organizations that are interested in dipping their toes in the water when it comes to procurement outsourcing rather than diving in heads first with a broader indirect people, process and technology outsourcing gig. In Bill's words, companies "are interested in the procurement outsourcing services, but at the same time they are very cautious. So, they look at pieces of the process first." But how does IBM's sourcing approach stack up in the market and what are the pros/cons for companies considering working with them?
Much of IBM's legacy in procurement owes to Gene Richter, whose centralized procurement leadership at IBM led to a much-needed PR turnaround for procurement as increasing numbers of companies modeled their own programs on the IBM model. But today, I personally don't believe the IBM legacy necessarily gives their clients a leg up on the procurement outsourcing of strategic sourcing competition (despite the marketing spin). In fact, I'd argue that in some areas, IBM was originally slower to adopt to technology and process changes in the market -- such as the adoption of reverse auctions and e-sourcing company-wide -- relative to other industrial bellwethers like GE and UTC.
In the announcement of their new strategic sourcing services, IBM notes that their new capabilities include providing spend-category experts who can analyze a business' spend, develop new sourcing strategies and negotiate improved contracts with suppliers". Which to me sounds like a page ripped from the marketing literature of their competitors, especially folk like AT Kearney Procurement Solutions, from five years ago, perhaps longer.
Now, granted, marketing is just marketing. And large companies like IBM are typically not known for innovation with offerings (nor marketing them appropriately to educated bloggers who they treat more like the unwashed press masses rather than inquisitive analysts, choosing to ignore a key question I asked after the fact which I'll get to in a minute). Perhaps more important, if they can knock the ball out of the park adapting existing and proven business models, that should be good enough. Moreover, in such categories as travel, office supplies, legal and telecommunication spend, there's no doubt that IBM's own internal expertise and resources -- which they claim play a key part in the actual execution and management of their client's sourcing strategies and programs -- can bring much to a range of companies across industries.
But isn't much of what IBM is offering here already available both through IBM consulting and IBM's consulting competitors -- not just outsourcing providers? The short answer is yes. However, when I spoke to Bill, he suggested that this new offering is about providing a "managed service" and the difference is that consulting is more of a "periodic" model. In the case of strategic sourcing outsourcing, IBM signs up for a long-term managed service where the deals are typically 5 to 7 years. Moreover, they are "tied to the business outcomes" and "sign up contractually to deliver the results". And the actual components of the service, as previously mentioned, are delivered by "IBM's own procurement organization" rather than a set of "hired gun" consultants doing it in on a one off basis. The marketing shtick here is that these are the same team members who manage $48 billion in spend for IBM already.
But whether or not these are the right resources packaged and sold in the right go-to-market model to manage your spend is not as cut and dry if you dig beyond the marketing spin. After talking to some customers and IBM partners about their experience, the answer might not be as simple as it seems. Stay tuned for continued analysis on the topic, as well as additional commentary on the other aspects of IBM's new offerings, in additional commentary surrounding IBM's announcement later this week on Spend Matters.