We recently featured a series on Spend Matters PRO: Shared Services, Outsourcing and Procurement – Curious Intersections or Tomorrow's Three-Way Marriage (subscribers can read Part 1 and Part 2 on the PRO site, or sign up for a free trial by reaching out to us: firstname.lastname@example.org). The research briefs feature our learning and analysis from sharedserviceslink.com's recent US event in Atlanta. We'll spare you most of the details – this is a superficial Friday rant after all – but it suffices to say the event inspired us to think more about shared services delivery within procurement and what areas of current and future functional contribution are best suited for a shared services delivery model.
First off, perhaps it makes sense to explain what shared services is and means. From our vantage point, we define the boundaries of shared services on PRO as it pertains to procurement as suitable categories [and areas] to outsource. Note that we use this term to cover both internal or captive shared service arrangements as well arms-length externally outsourced approaches. We also use it to cover the technologies used, organizational issues such as meeting internal customer needs, how to drive more value out of the shared services engagement, and staff development.
Historically, shared services efforts that touch procurement have typically centered on just a handful of areas: accounts payable/invoicing, spot buying, travel and expense (T&E) and certain aspects of compliance. But the opportunity for a shared services model is so much greater than just these areas, especially in cases with senior finance support where procurement has historically lacked centralized influence and/or control over decentralized spending and supplier management efforts. As we observe on PRO:
Within procurement areas, think about supplier information management (SIM) and master data management (MDM) ... Within these areas, not to mention P2P, AP, transactional buying desks, capital expense buying desks, spot buying programs, vendor management offices and potentially other areas open to a shared services or outsourcing approach, CFO (and higher) championing of initiatives can make the difference between smashing success and mediocrity.
For companies where true procurement centralization of key processes will always be impossible for one reason or another, positioning individual shared services efforts (e.g., supplier management) makes tremendous sense. Yet for these efforts to work, it is essential to treat them as procurement-led initiatives rather than as extensions of other finance-focused back-office programs. This is why we like the notion of areas like supplier management as a shared service even more than AP and e-invoicing. As important, make the business pay for value. As we suggest on PRO: "come up with a pricing model for internal customers that is effective enough to encourage wise usage yet not so high as to drive them to other solutions ... Flat fees lead to overconsumption in all areas of life."
Whether managed internally, outsourced to a third-party, or delivered by a combination of internal and external resources, don't discount the potential for individual shared procurement services, potentially even those that finance and IT force on the business (e.g., supplier management for compliance initiatives). Even in cases where true procurement centralization will remain impossible, shared services remains a stealth means of not only enabling the execution of individual centralized efforts and mandates but getting the business to pay for programs!