Don't Ignore Outsourcing in Spend Management Technology Selection

In our presentation last week at the Best Practice Exchange, Brian Sommer and I hit on a number of down and dirty Spend Management technology areas. But a topic that we also felt was critical to discuss in the context of technology was the importance of not ignoring outsourcing in making software selection decisions. And that's because procurement outsourcing / BPO -- or managed procurement services, depending on who you talk to -- is absolutely beginning to catch hold. Whether it's in accounts payable, indirect category outsourcing, or supplier management / supplier content, targeted BPO approaches to procurement are generating more interest than ever before.

Based on this, I believe that companies thinking about technology investments in these areas should also consider the implications of whether a straight technology buy or an outsourced initiative makes the most sense. For example, for a company contemplating in investing in an EIPP (electronic invoice payment presentment) solution, might be make more sense to work with a provider in conjunction with a BPO firm to realize additional savings and efficiencies? Or for a company considering an upgrade to an older procurement and catalog management system on the indirect side of the house, might it make sense to instead start the conversation by examining what categories make sense to manage internally versus handing off to a third party (and letting that third party help decide the optimal technology approach)?

Another situation that I see coming up more often these days are organizations debating between investing in additional supplier portal, on-boarding and management capability versus simply working with a third party supplier network. This latter option is, in essence, an outsourced supplier on-boarding / management system. Food for thought.

Let's put on the vendor sales hat for a minute in this discussion. From a vendor perspective, we've found in my firm's marketing work that outsourcing solutions tend to appeal most to more advanced organizations (Innovators, Early Adopters, and Early Majority companies), rather than late majority or laggard companies. This means that selling into this market is still very much a missionary and educational exercise (which dictates an entirely different go-to-market approach). The messages and positioning that these type of solution providers deploy might end up being very different than those which might appeal to more conservative tech buyers looking to purchase a software-driven solution. And this presents the opportunity for marketing and message conflict even within a single provider! No one said marketing this stuff was easy ...

Jason Busch

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