As Neuwing established itself in the market, however, this strategy morphed to a model that incorporates a base retainer fee and success-based components. Today, Neuwing serves a range of organizations, but the most common type of engagement is focused on data-center selection, operations and optimization. Roughly 30% of their current business falls into this area, but the remaining percentage represent a growing base of diverse manufacturing assignments. Although Neuwing could easily extend its practice into supply chain design around energy usage, the great majority of their business is focused on usage within the four walls of organizations. Moreover, Neuwing has not yet been called in by clients to focus on supplier development initiatives around joint cost take-out opportunities at vendor facilities, but this does seem like a natural fit going forward, especially if it can leverage the more senior level relationships ICG Commerce has.
In terms of the implications of this acquisition and capability expansion by ICG Commerce in the broader procurement BPO and services market, Spend Matters' cursory analysis suggests the following:
- As greater knowledge flows through the market about the types of savings and dollars that are at stake through better energy-related procurement and supply chain decisions, it's likely we'll see more sophisticated Global 2000 organizations lead their services partners to investigate opportunities on their behalf; services firms will either need to build these capabilities internally or consider other options...
- ...However, the market for the types of services that Neuwing provides will continue to be fragmented. Given limited practices in this area by traditional procurement and supply chain consultancies, it's likely that other BPOs and SIs looking to get into this area will have to focus on buying and integrating targeted environmental/energy consulting practices. Given that larger BPOs and SIs (e.g., IBM, Accenture, Infosys, Deloitte etc.) are typically focused on transactions that fall within their current comfort and experience area, we're unlikely to see a significant number of deals in the area. Partnerships are more likely,as we'll see firms like WSP sought out by the procurement and supply chain practices of BPOs and SIs
- Procurement and operations services providers will increasingly seek to embed their energy-related cost savings advisory capability as a core component of their services. Yet since these services are most useful proactively (i.e., as a capital equipment need comes up) rather than just an auditing/improvement basis, the model will always work best in settings where a third-party firm is embedded from a CAPEX procurement investment standpoint and can suggest the impact of energy-related criteria on decisions as part of a standardized process across all related spend initiatives. This makes the BPO model more appealing, except in cases where a large SI or consultancy already has a constant presence at an account
- Technology automation will play a critical role in this sector in two key areas -- savings opportunity/implementation tracking and strategic sourcing. In the former, we'll see tools like Sievo that track and manage implemented savings at the unit cost or asset level become all that much more important. And for sourcing technology, we'll see the use of advanced sourcing and optimization approaches become critical as companies seek to collect and explore an increasing number of sourcing options and alternatives and analyze different award scenarios based on factors such as external incentives, ROI implementation expectations, etc.
- With smarter energy policy (hopefully) coming from Washington and other governments as well as the potential need for additional stimulus if a double-dip recession looks likely, we'll probably see energy credits for capital and related investment increase. This is due to the policy observation that the number of net new jobs created from company investment in energy efficiency and sustainability is almost always significantly higher than incentives for utilities to invest in sustainable energy plants, facilities and sources. Increased policy and incentives at the corporate point of energy usage are likely to bring greater interest among services providers in advising in the area, ultimately driving additional competition in the marketplace