Three Views: Looking Forward and Looking Back in Procurement BPO (Part 2)

In the first installment of this series, I shared perspectives from Everest Research (courtesy of Supply and Demand Chain Executive) and Horses for Sources on the emerging procurement BPO market. Now, here at Spend Matters we won't claim to know as much as Everest does about broader adoption trends in overall F&A BPO (let alone the nuances and quirks of each and every deal). Nor are we privy to the 546+ years of accumulated knowledge that Horses for Sources brings to procurement BPO advisory. Readers NB, the 546 years is an official statistic shared with me by their PR people and incidentally, this is why we are partnering with them on our research in the area -- that and the fact that their fearless leader is always fast and loose to plunk down the corporate Amex to pick up the single malt tab. No, we're not the outsourcing gurus here at Spend Matter, but we do know enough about the inner workings of procurement and have enough experience analyzing procurement BPO from an insider perspective to be useful in offering up an analysis as well.

In this second installment of this series looking at procurement BPO, I'd like to begin by picking up on some Horses for Sources commentary suggesting that the current technology landscape aside BPO "bears bad news for Ariba, which pulled back from a BPO strategy in recent years and has failed to progress its attempts to partner with HP on deals." In essence, I agree with Phil that Ariba is approaching this market from an area of weakness given their past (not just counting HP, mind you). In the past six years, Ariba has developed a less than stellar reputation in the market with partners for what's collectively known in the services business as "fee hoarding" -- something far more common than you might think, and not unique to Ariba.

This reputation with a number of SIs and consultancies has most certainly tainted some BPOs when it comes to engaging with other technology (and services) partners with whom they know they can't entirely trust when it comes to maintaining a clear prime versus sub role on a particular client engagement. Yet I do believe Ariba is serious about attempting to rebuild its credibility as a partner that can be trusted to share in the fee love from both consulting and BPO partner perspectives. Ironically, however, I've heard from Ariba customers that some actually like the fact that Ariba tends to keep services revenue in house by providing what can amount to a more economical overall solution on a total cost basis as well as offering a single "throat to choke" if things do not go as planned.

Yet perhaps the biggest challenge coming from working with Ariba in terms of BPO has little to do with their historic partnering engagement approaches. Rather, it's the fact that Ariba is a SaaS vendor that offers little capability for BPOs to create additional implementation customization and value-add relative to what they can layer on top of SAP or Oracle. And in the case of best of breed technology, Ariba has failed to differentiate relative to its competitors in important, yet peripheral areas like advanced spend analysis and sourcing optimization -- where BPOs can bring additional expertise and capability.

One area where BPOs may opt for Ariba has little to do with software, SaaS, cloud or otherwise. Rather, I think BPOs might see a role in partnering with Ariba for category and process expertise in key areas similarly to how Genpact has partnered with ICG Commerce to deliver a more complete and deep solution in certain verticals and spend areas. That is, if they can get comfortable with working with a vendor that has an historic reputation for taking control of client relationships and staffing its own resources over calling in partners (which may in fact be a good decision for the client, or may not, depending on the circumstance).

Jason Busch

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