The Procurement BPO Offenses of Industry Analyst Research


Phil Fersht is an old friend of mine, although it will probably take a Fedexed bottle of Oban to keep him so after this rant. Phil is one of the few individuals I trust when it comes to getting a straight shooter view of the entire outsourcing, software, and services market. His gut instincts are right the majority of the time – and his own research and commentary is always both solid, and as important, a fun read.

But as Phil and I have both learned, as our respective firms grew significantly past ourselves, it can be hard to always maintain the same level of expertise with additional resources in all areas as we grow and branch out. Big does not necessarily equal better, although I’ve been extremely fortunate to join forces with a head of research and business partner, Pierre Mitchell, who is 10X better at this stuff than me.

Earlier this week, one of Phil’s analysts, an expert in big time BPO, penned a post that is so begging for a response that I had to hold back from writing it before sleeping on it (I’ve learned over the years to contemplate before dusting off the rhetorical cannon). But having woken at five this morning with the article still on my mind, I decided to put virtual pen to paper and light the fuse. The article in question, Predicting and postulating potential procurement provider positioning post-Procurian purchase, attempts to cleverly segment procurement BPO providers into three “P” categories based on where they stand in the aftermath of the Procurian/Accenture deal.

Upon first glance, an outsider might read it and come away in awe of the author’s knowledge (and the “fact-based” – smirk – credibility granted by the large chart embedded front and center showing relative procurement BPO market share). He certainly knows a thing or two about the broader market and brings impeccable credentials to HfS Research – I’ll give him that. But with procurement, I like to say the devil is in the spend details.

More important, the pseudo credibility granted by a data-based approach (which says nothing for the content of the piece); an additional market segmentation (to give further credibility – another textbook analyst approach); and above all, a lighthearted but seemingly “expert” voice, is dangerous when someone is not focused on the deeper procurement services marketplace itself rather than just large scale BPO. Such an approach is potentially misleading, and it shows even new research models can use old analyst tricks and try to ooze credibility by design. Now, I take no issue with the jovial tone in the piece. For example, explaining and using the “Latin root” for “multiple implication” as a category that HfS places three providers in within their segmentation. Note: I use the word “Latin” loosely, as polysemous actually comes from the Greek πολυσῆμα (not the Latin originally, as suggested). But I digress.

Semantics and linguistic citations aside (don’t mess with a former English major who was forced to take classics), my real beef begins with a definition over procurement BPO, as well as the segmentation itself and some of the players it contains. For example, to call the acquisition positive for “Denali” is to completely misread the procurement BPO space. Denali is a consulting firm with a managed services and staffing arm that is now central to the business. Any deals it may be involved in or have won from a partner BPO perspective are orthogonal to the strategy that it pursued for 99% of its existence. A solid firm it is, BPO jedi (I have two former colleagues involved that I respect tremendously). But a true BPO it is not.

As we note in the PRO research brief, Sourcing Managed Services: Not Consulting, Not Outsourcing, “The line between outsourcing and sourcing managed services can be somewhat blurry because the services provider does assume responsibility for the delivery of a project or outcome tied to a project (but not necessarily the overall charter or management of what the project is tied to)." And nor, as the text suggests, is Denali any more expert in direct materials than many other multi-headed consultancies, turnaround shops, and managed services houses that touch on direct spend and supply chain (e.g., Alix Partners, Alvarez & Marsal, Deloitte, etc.) despite what the Directors might put in a pitch deck.

I can dismiss the Denali placement as an innocent mistake. It is, after all, a solid shop, and I can vouch for a number of the folks involved as good guys and solid on delivery – and Dawn Evans, the wife of the MD, John Evans, who now runs SIG, is a hoot. But from an acquisition perspective (i.e., attractiveness for others to buy), the Procurian/Accenture deal means virtually nothing for Denali, as any serious BPO acquirer would find a firm that is not yet mature enough from an infrastructure perspective on the managed services side to gain significant scale out of (nor is managed services necessarily the right paradigm for a “buy” here).

Might we see Denali acquired in a deal structure involving a classic services “buy” including an earn out at some point? Absolutely. But not because Safeguard Scientifics (I mean ICG) decided to take a second stab at investing in technology and raised cash through the sale of its prized asset to a services giant. Now, if Accenture/Procurian decide to transition meaningfully to a managed services model to offer up a la carte category expertise/content, tactical sourcing, and/or market intelligence capabilities on-demand, then the managed services providers (which includes many sub-segments) might be more threatened. For now though, Accenture has bigger fish to fry.

I won’t comment on the Corbus reference because I have nothing to say about Corbus (aside from the fact that anyone who would pay a market premium for them as a result of the Procurian/Accenture deal should get their head checked). Perhaps the deal is good for Proxima (I would agree on this point), but for a number of nuanced reasons I won’t get into in this rant (see links at the end of this little tirade to other pieces I’ve written recently on M&A in this space). As for the other suggestions that it’s a mixed bag for sourcing and operations consultancies (not true) and problematic for others, well, that depends on one’s perspective and whether we define procurement BPO around mass scale sourcing, category management, and market intelligence or around something different (e.g., next generation source-to-settle capability, physical and financial supply chain intersections, supplier management and supply chain risk management, advanced sourcing know-how, nimbleness vs. mass, and many, many other inputs and variables).

I’ll close out with the observation that we can all be full of it. I’ve had my share of foot-in-mouth episodes over the years. More often than I care to admit! When you write, on average, 7,500+ words per week, that’s bound to happen. What’s key to remember is that just because an analyst or consultant – even a very senior one – uses an established brand and tosses together a nice framework (based on “numbers”), slaps on a segmentation and waxes eloquent, doesn’t mean they have fluent understanding of the in-the-trenches subject matter they’re talking about.

As a final note, please hold us accountable to same standard we hold others covering the market that we’re so passionate about ourselves. If we’re wrong, call us out. 

Further reading if you're so inclined (drop Sheena a line ( if you’d like a free trial to our research):

M&A Watch: Five BPO/Solution Oriented Procurement Firms That Are Most Likely to Be Acquired

An Evolving Procurement Solutions Landscape: Services & Consulting Lessons From FreeMarkets Alumni

Procurement Acquisitions: M&A Forecasts and Customer/Market Implications

Procurement Vendor Valuation, M&A, and IPOs: Recent Deals and 2014 Forecast

The Procurement, Network, and Marketplace Bubble: Differences from 1999-2001

The Booming Procurement Services Market: Backdrop and Challenges

Procurement Services Market Landscape: The Continuum of Procurement Services

Procurement Services Market Landscape: Market Drivers and Trends

How to Buy Procurement Research & Advisory: Part 1 – The Landscape

How to Buy Procurement Research & Advisory Services: Part 2 – Buying Strategies

Sourcing Managed Services: Not Consulting, Not Outsourcing

Working With Procurement Consultants: Sourcing, Implementation & Getting the “A” Team

Working With Procurement and Operations Consultants: Delivery, Measurement & Performance

PWC to Pick Up Booz: No Drinks All Around Just Yet (Part 1)

PWC to Pick Up Booz: No Drinks All Around Just Yet (Part 2)

Xchanging and MarketMaker4: PRO-Level Analysis and MM4's Capabilities

OpenText Buys Cloud B2B Integrator GXS: Great For IT Departments, Bad For Broader Procurement Market

The Procurement, Network, and Marketplace Bubble: Customers Be Warned!

VMS and Services Procurement M&A Watch: BPOs, MSPs and Outliers

VMS and Services Procurement M&A Watch: Competitor Options and Planning

VMS and Services Procurement M&A: Customer Tips and Tactics

Procurement M&A Watch: Protect Yourself, Customers!

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