Late this summer, Aberdeen's lead analyst in the procurement area, Constantine Limberakis, left the research world to get his hands dirty in the supplier management sandbox, joining HICX Solutions Ltd. as the head of marketing. I've known Constantine for years and used to consider him one of my go-to colleagues and experts in the P2P solutions area (Ariba specifically) before he left the consulting world for the industry analyst halls. Now, he's made the transition full-time over to the vendor side of the house.
I had the chance to catch up with Constantine recently and was especially curious why he was placing his bets with a software provider in a growing area, and one that we're quite passionate about here on these virtual pages: supplier management.
In an interview series featuring Constantine's view of the current supplier management market, we hope that his passion will prove contagious, elevating the level of interest in this broad topic that we both agree will become just as large as strategic sourcing and P2P.
Spend Matters: Why the big bet on supplier management versus other areas? ?
Constantine: Supplier Management is the direct enabler for increasing operational efficiency, reducing maverick spend, mitigating supply chain risk, and ensuring regulatory compliance. Why? First, because procurement organizations are maturing and more activities are being outsourced. So the spend you can directly influence and optimize starts to diminish.
Second, procurement organizations have traditionally focused on sourcing as a means for reaching out to suppliers. While valuable, these activities tend to have a limited lifespan as more spend comes under contract, forcing the examination of other savings levers such as demand management, process optimization, and especially supplier management. Being more effective in the latter helps you get the most from existing relationships while optimizing spend across the entire supply chain (direct and indirect). By executing a comprehensive supplier management program, organizations can move away from the "three bids and a buy mentality" and retain sustainable returns over time.
Spend Matters: Which areas of supplier management are capturing the most customer attention today?
Constantine: Based on the current mood of global business, compliance and risk have gained the most "top of mind" attention. Whether mobilizing to adhere to the Dodd-Frank regulations (e.g. Section 1502 on conflict minerals), establish a FCPA program or mitigate the risk of a revenue-damaging event such as the tsunami in Thailand, many organizations continue to put a Band-Aid on these issues with their current technology landscape.
Visionary companies understand that the best way to overcome these and their next set of supplier challenges is by fixing the process at the onset of the relationship. As such, we are seeing many solving their compliance and risk initiatives by establishing better data governance and processes using technology that can manage the entire supplier lifecycle.
Spend Matters: Do you see a movement to created integrated services/BPO for supplier management beyond just software?
Constantine: Absolutely. In this tough economy, organizations are seeking paths to slash costs while investing in initiatives that generate revenue and/or strategic advantages. BPO services enable companies to hand over non-strategic, non-differentiated efforts to a strategic partner, which can offer cost advantages and enable the company to shift their scarce resources to more strategic initiatives (and many tasks within supplier management offer perfect use cases for outsourcing). Also, companies are starting to look more at the results that a technology can deliver -- they don't want to worry about doing the in-between steps just to get to the final outcome. Thus many are looking to have trusted providers deliver the process directly and purely measure performance based on this outcome.
Overall BPO offers an organization the ability to extend the enterprise cost effectively by outsourcing all or parts of supplier management. An aspect of this wider trend is Business Process-as-a-Service or BPaaS. I believe BPaaS is gaining traction because it provides a means for organizations to leverage both the BPO capabilities and Software-as-a-Service from one provider. This transfers responsibility for delivering processes in accordance with defined service levels and metrics, while maintaining insight and control over the entire supplier program.
Stay tuned as our interview with Constantine continues.