Another Market Research Firm Attempt Comes Up Short on Procurement Outsourcing

It never ceases to amaze me how consistently market research firms come up short in defining and capturing what makes up the procurement outsourcing or procurement BPO market. There seems an almost arbitrary line between whether or not software providers and consultants -- and consulting revenue -- should be included as part of the buy-side outsourcing catchall. In my view, this is a huge mistake, as in practice, there is no grey area between having constituents outsource a function and result versus subscribing to or buying a software or service. To wit, outsourcing requires that an external partner take on the responsibility for not only providing the potential of an outcome (e.g., identifying savings, providing the potential to reduce maverick spending, etc.) but the actual delivery of the result. For this reason, I have a very difficult time understanding how the firm, Marketsandmarkets, explains the scope of procurement BPO in a recent report in the banking sector.

According to a summary of the report, Marketsandmarkets suggests, "Accenture, Ariba, and ICG Commerce dominate the emerging procurement outsourcing market." Two players on this list, Accenture and ICG Commerce, are no doubt among the leaders in the growing procurement BPO space (I'd also add numerous others to the list including IBM, Genpact, Infosys, Xchanging, etc.) But Ariba, by its own go-to-market approach, is not even a player in the outsourcing game. In fact at Ariba LIVE, Ariba team members shared with me a very credible strategy of how they could enable both end-user organizations and other outsourcers with a combination of their services and software. Even though Ariba has the capability to deliver complete sourcing and related procurement solutions, they do so as a services provider, leaving the decision to implement results with the client organization rather than signing up to take responsibility for the actual execution.

For this reason, firms like IBM and Accenture, which have both procurement BPO and regular procurement consulting practices, separate into different internal delivery and business development organizations. Like Ariba, the consulting arms of both companies can help to deliver both software solutions and identified savings through operational engagements, but it's always up to the client organization to flip the final savings switch.

As procurement outsourcing heats up in the banking sector and beyond, it is incumbent on potential customers of outsourcing services to do their upfront homework on what sources of information to trust. Just as the Black Book of Outsourcing has continually helped confuse and butcher the definition of what comprises a procurement outsourcer, it appears Marketsandmarkets is continuing in a tradition of obfuscation rather than helping to clear the BPO air for CFOs, CPOs and CEOs to make better outsourcing decisions and to decide for themselves whether a services-enabled or full-blown BPO approach is right for them.

Jason Busch

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