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Below, we feature excerpts from Part 2 of our analysis exploring how managed services providers (MSPs) might lose out to business process outsourcing firms (BPOs) in the drive to deliver value for complex services procurement categories. For subscribers, access the original here: Holding Managed Services Providers (MSPs) Accountable to a BPO-Based Standard (Part 2):
In the first installment of this series on Spend Matters PRO, we explored the changing managed services provider (MSP) ecosystem and suggested what we believe will be a new battle between business process outsourcing (BPO) firms and traditional, often contingent-focused MSPs for the management and program oversight of broader services procurement initiatives for organizations looking for an outsourced services procurement option. We gave three reasons why we believe procurement-centric BPO such as Procurian, Proxima, Accenture, Xchanging, IBM and others are well positioned to compete for this business:
- 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 better outcomes.
- The more effective BPOs have built engaging models around subject matter and category expertise including category-specific enabling technology (both are critical to moving beyond initial wave compliance and savings opportunities for services procurement).
- Many BPOs have a stronger appreciation for the broader solution platform requirements outside of just vendor management system (VMS) enablement for contingent spending.
In our view, the more effective BPOs we track are making substantial investments in senior client-facing resources that become effective members of the company procurement team. These individuals often focus on opportunities to drive results that extend far beyond basic sourcing or compliance opportunities. In contrast, MSPs often bring limited subject matter expertise outside of contingent labor or basic SOW-type procurement initiatives.
MSPs typically bring a commendable level of compliance support and back-office efficiency to the procurement function. Some have branched out beyond contingent labor alone in managing SOW and project-based services, ensuring compliance from both co-employment and broader industry/regulatory compliance requirements (e.g., financial services industry requirements). We have even observed specific MSP capabilities in this regard around vendor management programs for services providers as well.
But generally speaking, outside of contingent labor and more basic SOW-type engagements (especially contingent work reclassified as SOW for compliance reasons), MSPs have failed to deliver the valued-added capabilities that top performing BPOs routinely bring to clients, including:
- Services category-specific analytics and reporting (beyond contingent labor)
- Benchmarking and category-specific measured and reported KPIs for both internal and vendor measurement
- Senior resources that can engage spend owners on a peer-to-peer basis to foster empathy, respect, and ultimately savings and spend capture, based on rapport (i.e., knowing more, and bringing a level of seniority, to a given category than an internal procurement organization has been able to historically)
Interested in this level of commentary and analysis everyday? Take advantage of our special discount to the first 25 yearly Spend Matters PRO subscribers we sign up this week. Email (smoore (at) spendmatters (dot) com) for more info.