For Outsourcing Guys, Procurement Outsourcing Still Feels Like a Yawner

One of the outsourcing bloggers that I enjoy reading the most is Phil Fersht. Phil writes his own blog, Horses for Sources, and also contributes over on ZD Net. On a recent post over on ZD Net, Phil offers up his forecast for the top outsourcing trends and issues for 2008. His post is a great synopsis of some the major issues that will impact procurement outsourcing this year, as well as what to expect from a pragmatic, in-the-trenches perspective. But in his analysis, procurement outsourcing -- as it does for most outsourcing experts -- takes a backseat in the examination. According to Phil, "Procurement Outsourcing (PO) will continue to be adopted at a slow, but steady pace, and will be increasingly bundled onto existing FAO engagements as many of the more experienced adopters seek to add more indirect spend management processes into their outsourced portfolio of services. Like HRO, the offshore vendors are learning how to service these processes more effectively, and expect this to be a driver for more adoption next year."

Now, I'll be the first to admit that I'm not an outsourcing expert. Even though I've done a fair amount of work over the years in procurement outsourcing, specifically, I know about as much about HR outsourcing as, well, what HR people know about procurement and how best to overspend on benefits and other related areas. But I do know that outsourcing wizards like Phil and Vinnie Mirchandani still think about procurement outsourcing as a secondary area of focus, at least when it comes to the go-to-market approaches for the major outsourcing providers, not to mention interest levels for companies and executives considering outsourcing arrangements. My questions for them and the Spend Matters audience is what will it take to change this?

I'll try to answer it myself before hearing what others have to say. To begin, it's my hypothesis that most outsourcing experts, ironically, really do not understand how procurement and supply chain functions work in practice. To them, procurement is essentially an outgrowth of F&A, and technology is an extension of ERP (which might in part be becoming true, at least from a core requisitioning standpoint). But few pundits and providers really understand how procurement is a giant lever not just for cost, but for overall risk management and even company innovation as well. Perhaps, here, it will take a bit more creativity and experience for providers and pundits alike to realize what is possible (and also more involvement in the direct materials and operations areas as well). The other major reason I believe many of these folks give short shrift to procurement outsourcing is that unlike other areas of the business, the technology that supports it is not as mature as say financials, network and systems management, HR, etc. And for folks that always tend to put IT and process ahead of domain and functional expertise, it's not surprising that they would find procurement backwards relative to other parts of the business which are riper for outsourcing because they're broader and deeper from a technology adoption perspective.

In any event, I could ramble on about this for far too long. I'd be curious to get other opinions on this subject, too -- from outsourcing providers, practitioners and pundits alike. Like many others I speak with, I believe that awareness and education around Spend Management is our largest opportunity to drive procurement outsourcing projects and success.

- Jason Busch

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