Seven Reasons Complex Services Spend Is Difficult — and Unique! (Part 1)

As we discussed earlier this week, my British partner in crime Peter Smith recently published a research paper titled Managing Indirect Services -- Procurement's Greatest Opportunity?. In it, Peter leverages some of the concepts from a book he recently co-authored, Buying Professional Services: How to Get Value for Money from Consultants and Other Professional Service Providers (Economist Books). One of the more succinct and refreshing aspects of his coverage of services procurement is his seven-step rationale for why organizations find it so hard to tackle services procurement and complex services categories for the first time compared to other direct and indirect spend areas. The first three items on Peter's list are:

  1. "Budgets for these spend areas are usually spread across the organisation such that it is difficult to understand just what is being spent with which suppliers, by whom and at what cost."
  2. "Requirements are often more complex and difficult to standardize compared to physical goods. The specification can be unique and subject to the particular skill set of an individual providing the service."
  3. "Supplying markets can be less well-defined than in the case of physical goods. For example, defining where the 'consultancy' market starts and finishes and its interaction with temporary or contingent labour can be challenging for a category manager."

An extension of these three is how difficult it can be to get stakeholders to articulate exactly what they are looking for in a services procurement provider (i.e., not just the outcomes or ends, but often the process to get there). Moreover, working with internal stakeholders to define and codify this information in a systematized approach that holds all parties accountable and describes the process by which the work will be completed and reported requires a set of skills that those accustomed to the buying of basic widgets will often need to learn.

Stay tuned as we share the remaining four items that, according to Peter, make services procurement so unique and challenging. In the meantime, we check out our research briefs on the topic:

Services Procurement Benchmarking – Truth in Numbers to Achieve a New Level of Program Results

Getting the Most From Analytics and Benchmarking

Jason Busch

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