Spend Matters welcomes this guest article by Kenneth J Hamilton, associate director of New Growth Platforms at Cognizant.
To be successful in a procurement outsourcing (PO) relationship and to sustain that success over a period of time, both the PO provider and client buyer need to be committed to some very simple and clearly communicated – yet many times overlooked – objectives and rules of engagement. But the PO blueprint is changing, and this article looks at where the market is now and where it is going in the future.
Put a Strong Governance Process in Place
In previous articles published here on Spend Matters, I wrote about the importance of the senior executive governance team and the critical nature of assuring these periodic steering meetings are held with strong attendance from the executive sponsors including c-suite members. Here is what really needs to happen prior to the engagement ever launching: The governance team, which is made up of people who the PO sales team sold into, needs to have a serious discussion with the retained team and clearly explain expectations and rules of engagement. Too often, that internal communication does not take place. The conversation needs to hit upon some very simple but real facts, including:
- The status quo is just not an acceptable way of doing business anymore, so making incremental improvements to the status quo will not cut it.
- Members of the retained team are the owners and will be held accountable for change management. The PO provider can bring best practices to the table, but at the end of the day, this is our house and we are accountable for taking this procurement practice to the next level of spend management core competency.
- The retained team will work collaboratively and positively with the PO service provider’s team to reimagine business processes and not just focus on incremental improvements to existing business processes with the objective of bringing the procurement organization to the next level of spend management core competency.
- To be assured you are the correct member of the retained team, read Nos. 1-3.
Look For an Assertive PO Provider
I have also discussed how the PO provider needs to have the ability to transform. Transformation requires change and change is not always popular. These words are being reiterated by the industry experts a lot this year. The retained team needs to very clearly understand that bringing in the PO provider as a staff augmentation exercise is not going to fly. The collaborative team will not meet the savings and ROI targets, and the retained team will not elevate its skill-base to become the procurement organization of the future.
Lead With Technology
Over the last several years, leading PO providers have focused on their source-to-contract (S2C) solution, leaving the procure-to-pay (P2P) solution to somebody else who doesn’t mind rolling their sleeves up, getting dirty and settling for a lower GPM at the end of the day. The buzz phrase of that time was “technology agnostic.” That’s a very fancy way of saying, “We don’t have any.” The downstream P2P technology of the end-to-end spend management solution, when it works correctly and has all the appropriate bells and whistle functionality, is the very critical leash around the dog. You can’t train the dog until you first get it on a leash. The P2P technology creates spend visibility and drives spend compliance.
Getting back to my main point that the blueprint for the new as-a-service economy is changing – incremental value brought to the process status quo is yesterday’s blueprint. PO providers that think they can get away with only bringing this skill set to the table are not long for this space. Client buyer executives need to think hard and communicate clearly as to what they are actually trying to achieve and be willing to have those hard conversations with both their internal retained teams and with the potential service provider that they intend to hire.
It’s a long sales cycle and a tough collaborative transition journey to achieve success. Don’t go into it taking any of this lightly with a halfhearted approach. Those questions can already be answered.