I next asked Bill which BPO firms, in his experience, bring the best knowledge and capability around sourcing and category management. In this regard, Bill suggests that "currently, the leaders are those who have been in the space the longest. These include firms like ICG Commerce, IBM and Accenture, which picked up FreeMarket's advisory business." However, you must also look at other acquisitions in the sector that have helped larger BPOs with sourcing and category knowledge. Here, Bill points to smaller players like IBX, which CapGemini recently acquired. He also suggests another niche player with some level of category knowledge is GlobaleProcure. According to Bill, firms excelling in category management are like Infosys, which "has been in the space for a longer period of time." Firms like Genpact, Wipro and others are "moving aggressively to assemble the pieces" when it comes to sourcing and category management.
I then asked Bill if there was room for new entrants that specialize in certain areas of procurement BPO such as aftermarket/service parts, specific category management expertise, etc. Bill responded that "we'll definitely see consolidation in the market among those who offer these capabilities (and BPOs that may buy them), but there is definitely room for those who are innovative." Bill adds that "perhaps vertical specialists may come in...companies may find a way to make it easier to implement and create greater ease-of-use [for a given industry]." In addition, a new generation of tools may help drive providers. "Tools like Coupa which are very easy to use," Bill observes, "can disrupt the market and make way for discontinuous change."
At the same time, Bill does not believe "big" is the only answer. He observes, "there have always been dozens of niche outsourcers in market, which does not mean their business model is not valid and viable. Companies need to think through their holistic strategy up front when it comes to tapping the capabilities of a BPO partner. Does going with the best-of-breed niche approach versus a targeted (or broader) model with a larger, global branded provider make more sense or less? It depends on a range of factors and companies need to fundamentally question what is their organization's appetite for change." In some cases, smaller niche providers can be less disruptive and threatening when slotted into specific tasks, functions and roles.
I was also curious to learn from Bill how Indian firms are differentiating today vs. in the past and whether they have advantages outside of cost structures relative to IBM/Accenture and other Western-based firms. Bill says "they bring a couple of things to the table." In his view, "process can be a bit of a religion (yes, measuring deviations can make sense)" for these guys. Yet "part of a science is knowing when to use it." To this I would add that by observing such models as Genpact's SEP methodology firsthand by interviewing clients, it becomes clear the best of intentions and upfront planning and methodologies only solve a small piece of the puzzle.
There's no doubt that providers housing super smart people without longer-term context, domain expertise, local empathy and cultural sensitivities are likely setting themselves up for on-paper success and potential real-world disappointments the more they preach process and the less they work on the local change management around implementing it. In Spend Matters view, based on our own discussions with a range of current and former BPO clients, organizations would do well to treat any prospective BPO provider that begins to get preachy about a given process or methodology with a degree of circumspection. There's no doubt a place for bully pulpits (especially those built upon solid benchmarking and research). But process provider hubris can actually turn-off and alienate key business stakeholders and users unless they're the ones also contributing to driving the change.
Enough editorializing from us. Stay tuned as our interview series with TPI's Bill Huber concludes in the next post.