What else is coming around the bend in the procurement BPO area? Finance involvement in decisions, for one. "CFOs will increasingly drive PO conversations, leading to FAO-PO bundling around P2P function," Saurabh notes. "Also, there [will be] an increased interest in outsourcing supply chain processes adjacent to procurement." Moreover, procurement outsourcing will continue to serve all sectors at market and "with the emergence of several platform-based PO offerings, there will be increased PO adoption by SMB buyers and in emerging geographies." Solutions will also begin to enter their golden years and buyers will increasingly see more common models. Here Saurabh expects "solutions to mature -- especially around the concepts of defining and realizing savings and pricing for such contracts."
Fee structures will also become more uniform. "We are seeing the market mature to hybrid pricing structures," Saurabh observes, "where the majority of the fees that service providers charge is a fixed fee for the spend that they manage and a small portion of the fees is performance-based or gain-sharing to provide some skin-in-the-game for the provider."
What else does Saurabh see in his spend crystal ball? A changing landscape for one, not to mention the virtuous cycle of market consolidation followed by new entrants. "We will see new players entering the market, and we will see more acquisitions," he believes. "Sourcing and supply chain consulting firms like Bristlecone are entering the PO market, most FAO service providers are starting to provide some PO services, internal captive organizations (like Xerox -- ACS, DHL) are thinking about offering services to external clients ... [moreover] technology providers like Hubwoo also have services layers now."
Regarding acquisitions, I agree with Saurabh that we'll see increasing market consolidation. Spend Matters is aware of a number of offshore firms looking at targeted on-shore acquisition candidates (and global providers as well). In particular, more than a handful of global players are looking to purchase boutique sourcing/supply chain consulting firms with strong client relationships. We also know that GlobaleProcure is a much sought after asset at the moment by numerous offshore providers (but not one that is necessarily on the market given its strong organic growth). Still, for players like Genpact to increase their credibility with procurement leaders outside of process-driven approaches and benchmarks that emphasize general methodologies over deep category expertise and empathy, it will be necessary to acquire or build the right set of assets.
For further reading on the subject of procurement BPO, you can download, for free, Spend Matters and HfS' latest joint research on the subject:
The next paper in this series will be publishing soon, so check back in early May. In the meantime, we'd like to thank Saurabh and the Everest team for putting out such a useful piece of research and taking the time to share their thoughts with Spend Matters.