Services Procurement — Beyond Contingent Labor

procurement

Purchased business services have been around since businesses have existed. Yet the full extent of services spend in enterprises still seems to elude most procurement organizations trying to exert meaningful commercial influence on such spending.

Over a decade ago, the “services procurement problem” began to come to light, but the focus was understandably often focused on contingent labor spending, and in particular, on temporary staffing services. Carving out this spending helped somewhat, and the evolution of vendor management systems (VMS), purchased alone or via a managed service provider (MSP), focused technology support on temporary labor and increasingly on independent contractors.

Most recently, many VMS solutions have a broader focus to procuring external labor from online labor pools, also known as work intermediation platforms (WIPs). What is emerging is very much like source-to-pay (S2P) solutions for a broad range of labor-based services.

The problem, however, is that many procurement organizations have already made investments in existing S2P applications, even though they are usually not terribly good at managing the broader footprint of external services beyond rate-base services that can be shoehorned in a SKU-based catalog approach to e-procurement. Conversely, the VMS-oriented solutions have been cordoned off to manage contingent labor even though services spend takes all forms and is buried across nearly all spend categories in a procurement organization’s “spend taxonomy.”

Services are increasingly information-based, industrialized and even productized; they also are being sold increasingly as complements to products and assets (aka "servitization"). So services procurement is basically becoming inextricably linked with all procurement.

So, how should a procurement organization take a more comprehensive, unified services procurement approach across the company and across all services categories? This is a very difficult question to answer, not to mention think about in a systematic way.

Later this week on Spend Matters Plus, we will lay out this question and tentative ways of thinking about it as catalyst for further consideration and thought by procurement practitioners.

Voices (2)

  1. Andrew Karpie:

    Brian, Thank you, as always, for your focused comment. We definitely agree that, while its going to be difficult, broader procurement perspective on managing services should start to be pursued!

  2. Brian Hoffmeyer:

    Agree that the question you ask – So, how should a procurement organization take a more comprehensive, unified services procurement approach across the company and across all services categories? – is difficult to answer and to even wrap your head around. That said, it’s important as companies are missing out on a number of things if they don’t have a unified approach. Looking forward to your follow up on this and seeing if I agree with it! 🙂

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