Why World Domination in Indirect Procurement Might Come from VMS

talent management

Let me net this out crudely upfront:

VMS + Catalog = World Domination in Indirect Procurement.

Huh? Let me explain.

In an upcoming series we’re going to publish related to VMS systems, indirect procurement and catalog-focused e-procurement solutions and their increasing convergence, we’ll dive into this content in more detail. But for now, let me present the basic argument.

Services procurement is harder than indirect goods procurement. The former is more complex to model and manage than using a catalog-based SKU-like approach. Services spend is also embedded and hidden in other spend areas. For example, contingent labor spend reaches much further than just temp staffing spend.

Now, you may ask, “Can’t services be modeled like SKUs? Can’t there be a ‘service catalog’? Don’t shared services (or ‘GBS’) groups have service catalogs?”

The answer is, “Yes.” But the traditional catalog-based solutions don’t model the “asset” behind the service — the worker. This is where the VMS providers have an advantage, because they manage those glorious mobile assets called people (or workers) that create the services. The indirect procurement system must therefore have a capability to track and manage these assets themselves, as well as the ability to catalog and manage the services that come from those assets. A traditional SKU-based, catalog-oriented e-procurement provider can only crudely model the services but not the workers who create the services (or the service providers like BPO firms or consulting firms that aggregate those knowledge workers).

So, if I were the CEO of a VMS solution, I’d definitely think hard about building or buying a catalog management vendor, especially if I wanted to enter the German market. Quite simply, Germans love catalogs! One great example of a provider adding intelligent, service catalog functionality to traditional catalog capabilities is jCatalog.

I would also expand the capabilities of contract management and supplier management to manage the granular aspects of the complex services being purchased and managed. This is where Hiperos got its start and there are others. In fact, TPI, (now ISG) wrote a nice paper on these tools — and then of course proceeds to pitch its own. State of Flux also has some capabilities, although coming from an SRM consulting house rather than a BPO sourcing advisor like ISG. The most innovative new software player we’ve seen recently though in complex third-party management is SirionLabs.

Anyway, all I can say is that if a VMS solution could add this advanced catalog management and contract management functionality, with some additional capabilities added in sourcing and supplier management — which might also have a reverse osmosis effect and help MSPs perform better sourcing services — then I think the procurement technology market may have a formidable offering that is neither an amalgamation of existing VMS and catalog-based indirect procurement solutions — I won’t name names here — nor a catalog-based solution trying to bolt on some smart forms to emulate complex services categories.

What do you think? Can HR-centric VMS solutions have procurement DNA and broader procurement functionality injected to create a unified solution that handle all indirect spend?

Stay tuned for further coverage in this, but we’d love to hear your thoughts.

Voices (4)

  1. Pierre Mitchell:

    I think you’re missing the intent on this one. This is about one solution that handles ALL indirect spend, not just all indirect services spend. So, I’m talking about one solution that combines VMS and also handles items (either consumables or stockable items) such as: MRO, office equipment/supplies, promotional items, lab supplies, IT equipment, etc.
    Thanks for writing in though – Fieldglass is an excellent solution for services for sure.

  2. Nexus789:

    Already doing it via Fieldglass and a MSP provider – has capability across the full services spectrum.

    We have broken the PEOPLE Category down into sub categories – contingent labour, services procurement (contains professional and business services) and independent/freelance.

    The challenge is setting up all the contracts to drive suppliers to the VMS solution. Fieldglass can also handle ‘freelance’ and ‘independent’ sites via a ‘compliance’ process.

  3. Pierre Mitchell:

    Dan, thanks!

  4. Dan Roehrs:

    YES!! This is spot-on Pierre! Even back in our AnswerThink days when doing e-procurement implementations of e-procurement of Commerce One, Ariba and Netscape did we encounter customers telling us that, “this e-procurement thing is great and everything, but how do I put in all my services spend (because I got a ton of that!)?”.

    I specifically went “over” to the VMS world from e-procurement because I saw (after doing so many spend analytics projects) that an organization’s total indirect spend was saturated with as much as 60% of services related spend with traditional e-procurement’s only answer to address it was to create “special request forms”.

    But as you’ve correctly pointed out, the VMS technology only does so much to address the procurement and sourcing aspects of spending for an organization. Additionally, these systems were very specific and/or “niche” and often times required the help of the very staffing companies that design/built them to use them because you certainly couldn’t roll them out to the casual requisitioner. Enter the MSP.

    So I then went over to the MSP world to better understand why they are not going after the spend like more of a category management offering (sourcing, contracts and vendor risk management). In all of this, what I’ve found as why these 3 areas are not as comprehensively successful as they could be is not the fault of the providers, but rather a fault of how each of these solutions grew up in their respective industries with little awareness across the entire demand chain. You are so correct; having not only that cross category and solution vision coupled with catalogable solutions that organically (not cobbled together (“frankenstein” stitched)) work to address all indirect is game changing. Ariba clearly saw this early with its attempt to build out this (services procurement) capability early with a few beta failures, but that eventually led to the intriguing SAP/Ariba/Fieldglass combination. While that’s the best “under one contract roof” solution for the market, the downside is that each separate offering have their respective strengths and weaknesses that result in the same end result for procurement organizations; point solutions.

    At least one bright spot is that in today’s BI world, pulling together data and trends from point solutions is far easier than it was “back in the day” where the only way to truly get a complete picture and end-to-end process was to go with a massive end-to-end (great horizontally, but not very “deep”) solution.

    Great write-up my friend!

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