Procurement Outsourcing – Xchanging, Proxima, Procurian and insight from HfS

We reported here and here on the name changes from the buyingTeam and ICG Commerce to Proxima and Procurian respectively.  And it’s been an interesting few weeks for procurement outsourcing generally – as well as these developments, Xchanging announced they had retained BAE Systems UK procurement outsource business, and also released their annual financial results last week. Comment and opinion seemed to be divided as to whether they showed that their difficulties of 2011 were behind them, or highlighted some ongoing issues. But their shares finished the week up over 10%, so we’ll take that as a hopeful sign.

And do download our recent White Paper which has a different angle on procurement outsourcing...

So back to Procurian and Proxima, and there’s an excellent analysis of the re-branding over at Horses for Sources. We’d recommend you read Tony Filippone’s piece there, as he makes some excellent points. He explains that Proxima and Procurian are challenging the traditional stalwarts of procurement outsourcing -  IBM and Accenture, and they can do this because the nature of the game is changing.

Procurement outsourcing is no longer about shifting lots of mainly transactional staff to a cheap offshore location – that model never really took off actually compared to outsourcing in other business sectors.   With the cost differential between countries shrinking, and procurement technology getting easier to implement and use (hence less resource needed purely to run the systems anyway), we can’t see offshoring suddenly becoming a big thing again in the procurement sector anyway.

Rather, successful procurement outsourcing is largely about bringing deep skills and leverage to bear in particular spend categories, often indirect / services rather than direct materials. Proxima will argue that in order to do that successfully, you need to understand deeply the culture and specific needs of a client organisation. In the case of complex service categories (such as professional services), the internal governance and management of key stakeholders is often more critical to success than external market management. Hence that customer intimacy is vital.

Hence the thinking behind the Proxima re-branding is very much around the worlds proximity and intimacy – they’re positioning themselves with that idea of customer intimacy being at the heart of their proposition.

In addition, Filippoine explains that more clients are preferring “pure-play” procurement outsource providers. But the result is, he says -

“Highly specialized procurement services catered to the CPO is what the market demands, especially those that can help the CPO rapidly mature his or her delivery”.

I agree with virtually everything he says - there’s only one of his points with which I would slightly take issue. The quote above shows that his assumption is that these firms focus on selling principally to the CPO.

Whilst this is true in many cases, I know from discussions with Proxima and others that they will also strongly target CFOs (and at times, other members of the C-Suite). That may be because the CFO is looking for change and perhaps isn’t overly happy with the CPO performance – or it may simply be that the organisation doesn’t have a procurement functional leader who is senior enough to make an outsource type decision.

And yes, that does happen – I’ve done consulting work for an organisation with an annual spend of £1 Billion who had no real central procurement function or CPO.  So in such cases, the CFO is the obvious sales target for Proxima and their competitors. (The targeting of the CFO is also evident from the recent  sponsorship of the Economist Finance Directors’ Summit  event by 4C Associates – another UK based procurement outsourced services and consulting provider).

Proxima bike / car hybrid

Anyway, that customer intimacy positioning seems sensible for Proxima and plays to their strengths. And finally, last time we featured them, we discovered that there was a Peugeot Proxima concept car – now Proxima themselves have come up with another! It's a rather lovely bike / car hybrid, from Alvino, an Italian company.

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