Procurement Outsourcing – current trends and developments (part 2)

We've had some excellent "comments" on our previus posts on procurement outsourcing - we will come back and fetaure them in a full post shortly.

But we suggested in part 1 of this series last week that two major developments were changing the nature of the procurement outsourcing market.

The first is the desire to tailor services to meet specific client needs, and to explore different operating and commercial models to meet those needs.  It often seems to mean a blend of some services provided by the outsourcer, while others remain internally delivered, but with considerable integration between the two – “skills transfer” is increasingly mentioned in this type of model.

A number of recent deals demonstrated this – in terms of Efficio / Thames Water, Accenture / City of London, buyingTeam / BG and Xchanging / L’Oreal, the presentation  was a long way removed from ‘traditional’ outsourcing as we can see from these quotes -

“..the deal has an interesting structure as it is an "in-sourcing arrangement" which is bringing in skills and expertise from Accenture...”

“a first-rate strategic sourcing consultancy embedded into our core business, combined with our existing staff expertise and business knowledge...

” Xchanging will operate on a co-sourcing basis working alongside L'Oréal's purchasing team..”

Now these more flexible and nuanced models do bring their own issues – clarity of responsibilities being one that will be key as these deals go forward.  Knowing exactly what is expected from the external outsourcing partner is critical, and that may be less clear in this type of deal than in a ‘traditional’ full outsource. That may make it, for instance, harder to execute gain share type arrangements because it becomes difficult to pin down exactly what the outsourcer is contributing.

Talking to buyingTeam recently, it was interesting to hear that they have moved right away from that approach – linking payment to results is fine, but pure gainshare, they believe, encourages the wrong behaviours too often.

But on the positive side, these models allow clients to tailor the service to specific requirements that should fit their own culture and needs better than an off the shelf solution. They offer flexibility in determining what will be done by each party, the scope to flex that over time, and the benefits of skills transfer to staff who are retained within the client organization. These are all attractive propositions.

And it’s clear that major players in the market – like those named above – are responding to that by offering a range of alternative models in terms of delivery and payment mechanisms.

Stay tuned tomorrow on Wednesday for the second major trend..

First Voice

  1. agammy:

    I don’t think outsourcing procurement is right for everyone, but I think it can lead to major cost-savings if you do it right. I think, as with any outsourcing decision, finding partners you can trust is KEY!

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