Genpact: Procurement BPO Brains and Brawn (Part 1)

I had the chance to attend Genpact's industry analyst day last week in Boston. During the meeting, which didn't focus on procurement or supply chain exclusively but rather broader BPO, I was stricken by the frequency with which the management team continued to refer back to Spend Management, supply management topics and procurement case examples throughout their general presentations. It's clear that procurement BPO is not only one of the growth focus areas for Genpact -- it's among the top priorities overall for the firm. Ironically, there were only two other procurement/supply chain experts in attendance (from AMR and Horses for Sources), but I sensed the entire audience (40 or some analysts and BPO advisers) was interested in learning more about the topic, even if traditional BPO types fail to grasp the soft challenges that make pulling off procurement outsourcing so challenging even when the numbers suggest eight or even nine figure savings opportunities within companies.

In this series examining Genpact's capability in the area, I'll plan to cover a number of separate topics in a series of three installments. First, in this post, I'll tackle Genpact's core offering, approach and philosophy, including their relationship with ICG Commerce, an enabling business partner in certain spend categories. In the second installment, I'll look at Genpact's Smart Enterprise Process (SEP) methodology that benchmarks organizational procurement performance and defines prescriptive savings and transformation approaches that, on paper, appear to go far beyond labor-cost driven outsourcing arbitrage opportunities. And last, I'll share some specific thoughts around how I see Genpact competing in the broader marketplace, including their technology know-how relative to IBM, Infosys and others in the source-to-pay area.

As background on Genpact, many folks in procurement probably won't be too familiar their past, which dates back to the original spin-out from GE in what Genpact describes as a virtual captive model (i.e., the original Genpact assets were captive GE resources). GE still represents a substantial portion of their $1.12 billion overall BPO business, which is growing at a 22% CAGR; GE also makes up a number of the some 50 customer engagements in the source-to-pay area as well. As I see it, the GE legacy is both a help and hindrance when it comes to procurement growth. GE procurement was always ahead of its time, but its best employees often became frustrated and left because of management unwillingness to change (FreeMarkets is the best example of this). In other words, the history of GE procurement could be best described as both overly conservative and overly process driven, the latter owning to the venerable firm's Six Sigma roots.

Today, Genpact offers a range of procurement BPO capabilities, in both the indirect and direct source-to-pay arenas. ICG Commerce is a partner to Genpact for categories "where Genpact does not cover today, today." In contrast to ICG Commerce, Genpact sees itself as "broader," while having the ability to "impact spend" more than other BPOs because of its ability to manage the entire procurement and supply chain ecosystem. In addition, Genpact sees itself "doing more overtime from a category sourcing standpoint" and is currently focused on "rapidly growing sourcing expertise" to serve clients, both onsite and off. Given statements like this, I suspect the ICG Commerce relationship will never be entirely without some constructive conflict, yet today it does provide differentiation for both partners (check back later in this series for discussion on the relative strengths / weaknesses of both partners).

Getting back to Genpact's procurement BPO overview, of their close to 50 claimed outsourcing customers in the area today, the provider suggests that a minority (20% or so) are larger relationships that extend beyond a handful of specific enablement areas. Spend Matters research suggests this relatively low sounding percentage is actually quite normal for procurement BPOs and represents the relatively low sophistication of the market in general at this stage, as companies are testing the waters before fully committing to BPO partners. Overall, Genpact has over 41,000 employees spread across 39 operating centers in 13 countries. 75% of these resources are in India with the remaining spread across the Americas, Asia and Europe (7%, 12% and 6%, respectively). Of this number, approximately 3,000 are "procurement professionals," Genpact suggests.

From a technology perspective, Genpact has expertise in third-party tools such as "Ariba, Oracle, SAP and Emptoris" and it also brings its own proprietary SRM, spend analysis and diagnostic solution approaches. In total, Genpact claims that it manages $15 billion in spend for clients across over 12,000 supplier contracts. From a volume standpoint, Genpact processes over 2.5 million purchasing transactions and 8 million invoices per year. However, much of their literature suggests a significant focus on overall process effectiveness and execution as much as on transaction efficiency. Stay tuned as we analyze this positioning and Genpact's overall capabilities in more detail in the coming installments of this series.

- Jason Busch

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