Capgemini Acquires IBX — A More Flexible Procurement Outsourcing Model? (Part 3)

In the first two posts in this series on Capgemini's acquisition of IBX, I examined the IBX solution/software footprint and made a number of broader observations about the impact of delivering both BPO services and technology (and whether a single solution provider has a stronger offering when it owns a complete footprint, or when it partners, GC-like, with various vendors). In this post, I'll provide additional details and thoughts on how the move will position Capgemini in the broader outsourcing and procurement services market. First, let's tackle the combined BPO offerings that Capgemini can provide in conjunction with IBX.

Capgemini's overall procurement-support positioning is as generic as anyone's. This is not a bad thing; after all, the proof is always in the details and the savings numbers it puts up for its customers. Capgemini's view of the procurement lifecycle starts with sourcing and category management, and is followed by operational procurement services, payables management, compliance management, and reporting. This entire lifecycle will now be supported by the IBX On-Demand suite which includes (in IBX's language): sourcing, procurement, content and connectivity, contract management, invoice management, and business intelligence. All of this sounds reasonable, but where Capgemini's offering gets more interesting -- and differentiated to some degree -- is when it comes to how it breaks out the different capabilities it sells.

Capgemini positions four key service offerings. The first, strategic procurement services, provides "pure purchasing consulting with industry transformation and commodity experience." In other words, this could be an offering delivered by many consultancies, such as AT Kearney. I don't believe IBX's capabilities and expertise will move the needle much for Capgemini in this regard, besides providing some regional expertise for categories in the Nordic countries (e.g., local supplier lists, management practices, etc.) The second category of services, BPO procurement and payables, delivers "sourcing and procurement outsourcing based on business insight and a global Rightshore country network." My take? This positioning is the same as just about every other procurement BPO with an offering worth its salt. ICG Commerce, IBM, and Accenture all have a similar philosophy; the proof is in the details and case examples.

The third offering, operational procurement services, provides "global services to support spot buying, transactional procurement, eSourcing and supplier & content services." Clearly, IBX's capabilities around supplier content and related P2P infrastructure and supplier management will enhance Capgemini's previous capabilities in this area. Interestingly, spot buying services tend to be a somewhat periodic and cyclical business based on order-volume levels and inventory, not to mention R&D phases. (Perfect Commerce, previously Cormine, had a specialty in this area.) It can be a challenging business, and one that requires expertise to pull off. The fourth category of services that Capgemini is delivering with IBX focuses on software as a service (SaaS) technology. In this area, its vendor focus and loyalties are quite clear: it spells out that its capabilities are "SAP aligned with a unique add-on development delivered on-demand as SaaS." That's a mouthful for sure, but it's very much in line with the details I previously covered in the first two parts of this series.

From a staffing perspective, Capgemini and IBX will have roughly 1000 dedicated procurement resources and an additional "830 associated resources." By far, the largest concentration of these resources is in Europe, which includes 440 dedicated resources (roughly 200 more than what IBX had on its own). Their combined practice in the Americas will have 200 dedicated procurement resources in the US, Canada, Brazil, and Guatemala. India, China, Australia and South Africa represent smaller offices, with a combined 130 dedicated resources in the outsourcing practice.

In Europe, Capgemini clearly has one of the larger procurement outsourcing practices. By Spend Matters' estimate, if you count the software and consulting delivery components of IBX, they are probably the first or second largest player in the European procurement BPO market, although based on headcount and revenue focus, it's hard to make an apples-to-apples comparison. Still, these resources and capabilities make for a formidable offering given the combination of SAP technology expertise (and single-point delivery capability) and overall coverage and breadth.

But at the end of the savings day, I believe that what really counts in procurement BPO are two things: identifying savings (which are often driven by the quality and expertise of a provider's sourcing and supplier management capability) and making them stick. Measured against these criteria, does Capgemini, with IBX, have the better mousetrap in Europe -- let alone the world ? I'm not sure, yet I am certain that this deal, for competitive reasons, will go a long way to forcing the hand of other BPO providers to deliver greater integrated technology solutions with their own offerings.

Stay tuned for a two-part Friday rant series starting tomorrow on the challenges procurement BPO is facing in the market today including what providers will need to do to accelerate adoption and differentiate themselves from the pack. Phil Fersht, the best -- well, the only -- outsourcing analyst I know, and I are serious about informally teaming together to cover this market more closely. We caught up this week over a tipple and decided it made sense to explore the procurement BPO market in more detail together. As a start, we plan to explore the truth about what results customers have realized to date from various providers.

Jason Busch

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