Services Procurement: A New Savings Horizon

After a short April Fools hiatus, I'm back. Bloggers are too vein to not see their posts on a daily basis, I supppose. Could not resist the RSS call of the wild. Well, let's get to today's regularly scheduled programming ... In the past few months, I've probably had close to a dozen interactions with different services procurement vendors or practitioners taking a closer look at their services spend (often for the first time, in certain categories). Given the findings from a CAPs report that European Leaders sites in a recent blog post, it's no surprise that the general interest in services procurement is rising as companies discover the potential of the opportunity as well as some of the unique challenges it brings. It's important, however, not to downplay these hurdles. According to the post, the study found that "two-thirds of supply chain professionals viewed the procurement of services as being more problematical than just plain old materials and component procurement."

What makes services procurement difficult? The study notes that the volume of suppliers that an organization must manage in services procurement is part of the challenge: "on average respondents dealt with 105 active suppliers, as opposed to 36 active suppliers for the purchasing of direct materials." But these numbers only tell part of the story. As the analysis also points out, most companies lack the right systems and processes to proactively manage services spend. I'd add to this observation that it's not just the more advanced procurement organizations that appear to have a better handle on their services procurement spend.

In my recent discussions with providers -- especially in the contingent labor and talent management arena -- there does not appear to be a common trend around whether typical customers have also invested significantly in PO-based procurement technology enablement and management. In fact many companies who are more advanced in the labor-portion of services procurement might be behind in traditional catalog and PO buying (this is often the case when HR is takes the lead in the contingent labor procurement and management area). Food for thought, I suppose. For me, this clearly points to the need for procurement to seize the initiative when it comes to services procurement automation, making it part of an integrated technology and process strategy that cuts across spending areas. On the technology side, who can you turn to for services procurement automation? Click Commerce, Fieldglass, IQNavigator and Peopleclick are just a handful of best of breed vendors, to name a few.

- Jason Busch

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