Capgemini Procurement BPO: Realizing Platform/Category Returns From the IBX Acquisition (Part 1)

We've had numerous interactions with the Capgemini procurement BPO team recently, including a number of folks we've known for quite some time, going back to the IBX days (I personally spoke at one of the IBX customer events a few years back at Oxford, which included a center-stage debate with a European procurement/operations management professor if I recall). In these discussions, we've learned quite a bit about what's gone on since the Capgemini acquisition of IBX, which happened nearly two years ago (February 2010). We also investigated Capgemini's latest procurement technology/platform suite and came away with the impression that they are one BPO that is betting heavily on the idea that owning key solution elements matters just as much as partnering.

In a series of posts looking at Capgemini's progress, we'll first explore the latest commercial happenings, including our experience talking to a key reference customer. We'll then provide our thoughts on their P2P technology release that's happening this winter. For those Spend Matters readers who have not kept up with Capgemini (or IBX before), we think you'll be surprised at both their capability and specialization. For example, some of the work they've done on the P2P platform side of things (including a new UI overlay) rival Hubwoo's work on their own development and Simplifying IT's effort to improve the SAP front-line buying experience.

Globally, the Capgemini procurement BPO team now includes approximately 550 employees. Group leadership shared with Spend Matters that their new customer acquisition and expansion has "picked up significantly during 2011." Interestingly, the team suggests that roughly 50% of new relationships are now being generated through other parts of Capgemini outside of direct sales efforts from the Procurement Services business unit. This suggests that Capgemni is realizing positive synergy from a commercial perspective from the acquisition. While many deals are more targeted, the Procurement Services is also landing larger relationships, perhaps owing to the scale behind its parent company BPO organization. One recently signed relationships that Capgemini shared with Spend Matters is on a significantly larger global scale than nearly all deals we've seen in the market in the past 24 months.

From a commercial perspective, Capgemini has observed that contract length is becoming longer, at least after initial pilot or targeted initiatives, programs and roll-outs. In addition, "requests for backend integration also for strategic sourcing is a clear focus." This notion favors a similar finding in a recent Spend Matters research paper exploring the need for tighter systems integration between both strategic and tactical sourcing tools and SAP systems, especially in the case of direct materials. Outside of the sourcing and category management area, Capgemini has observed that the purchase-to-pay (P2P) BPO platform opportunity is proving particularly appealing with a significant subset of the market where older "partly failed" implementations are in need of replacement. In these cases, "usability, performance, spend capture capabilities and globalization are key" decision factors for those that opt for the Capgemini platform (which we'll investigate in more detail in a subsequent post in this series).

Curiously, technology best practice standards aren't driving the move and interest to BPO procurement platforms alone. In this regard, Capgemini notes that they're seeing strong demand for "customization/configuration in order to support the specific processes in place" rather than a "standard best practice approach." Still, technology is helping drive the Capgemini procurement BPO value proposition and over 50% of new BPO relationships in the area include a solution component. In part, this is most certainly due to companies wanting to buy outcomes for P2P rather than having to worry about adoption of their own. But at the same time, there's also a broader BPO component at work here, including growing prospect and customer interest in models that combine P2P platforms with operational procurement and "buying desk" services for both one-off and more frequent spend items and areas. Capgemini's argument here is that "the buying desk both encourages compliance where the technology tool is not enough [alone] and drives additional savings on spot buy and light sourcing."

Stay tuned as our investigation of Capgemini's procurement BPO capabilities continues. We'll take a look at both Capgemini's customer experience as well as the direction of their technology stack and platform, including a lot of recent work their team has been involved with on the tactical search, shopping and buying experience to really transform the SAP SRM experience.

Jason Busch

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