Outsourcing Battleground: Will MSPs Catch Procurement BPOs For a Bigger Services Procurement Prize?

Over on Spend Matters PRO, we're putting the finishing touches on a series of posts (we apologize for the 4,000 word length, but services procurement is complex) concluding next week. The series explores how managed services providers (MSPs) in the contingent labor space are falling behind procurement BPOs in complex services, and have a lot of catching up to do in areas such as marketing, legal, consulting, and BPO spend. In fact, it's our broad-brush recommendation that finance, IT, HR and procurement executives should consider procurement BPOs such as Procurian, Proxima, Xchanging, IBM and Accenture over Addeco, Tapfin, Volt, Randstad, etc. for the outsourced management of services beyond contingent labor.

Chances are, you won't see this type of analysis elsewhere. And we know: it's not right to stereotype an entire class of providers. But from an analysis standpoint, while the services procurement world is a well-meaning and truly collaborative bunch -- much more so than traditional procurement types, I might add -- it is one that generally speaking, really does not understand as much of the evolving procurement function and truly complex services category nuances once you get based contingent staffing in the same manner that the stronger procurement BPOs do. In their defense, mind you, procurement-centric voices such as Spend Matters are nowhere near as deep in the intricacies of contingent labor, although we try to put in a valiant effort!

We encourage Spend Matters PRO subscribers to let us know your thoughts on this series and our approach to tackling the services procurement solutions ecosystem from a broader perspective outside of contingent labor. In the meantime, if you're curious about the topic, we hope this Spend Matters PRO excerpt whets your appetite:

We believe procurement outsourcing providers are already encroaching on MSP territory in certain "gateway" services categories such as consulting, systems integration, audit/attest, IT outsourcing, legal, etc. While these categories may prove the initial battleground between traditional MSPs expanding their capabilities around SOW and project-based sourcing, it's our belief that BPOs are likely to move further downstream, even into the management of contingent-based spending.

There are three key reasons for this. First, BPOs often bring a more empathetic and better understanding about the impact of services categories on the broader business beyond HR and procurement, including how best to engage senior stakeholders in driving to better outcomes. Second, the more effective BPOs have built engaging models around subject matter and category expertise including category-specific enabling technology (both of which are critical to move beyond initial wave compliance and savings opportunities for services procurement). And third, many BPOs have a stronger appreciation for the broader solution platform requirements outside of just vendor management system (VMS) enablement for contingent spending. This includes the ability to map and leverage sourcing (including optimization tools), contract management, supplier management, P2P, and other procurement systems with a VMS environment.

MSPs, be warned! As the charter of services procurement expands, your sector is about to heat up with additional substitute if not direct competitors. We hope that Spend Matters PRO adds a much needed procurement-led voice to the expanding world of services procurement.

- Jason Busch

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