Procurement Outsourcing — From West to East to West Again

So what's really going on in the world of procurement outsourcing today? Even though I don't put much stock in the Black Book of outsourcing from a provider rankings perspective, I do think some of the trends highlighted in their latest edition are worth noting. Supply and Demand Chain Executive recently featured a rather lengthy summary of the Black Book's findings, perhaps the most interesting of which is that US and UK companies "increasingly are looking to domestic providers of procurement outsourcing services, even as they seek to expand their use of business process outsourcing (BPO) to reduce costs." The Black Book suggests that protectionism may be to blame for this trend. But I disagree. Personally, I think that offshore procurement outsourcing providers are, as a general rule, horrendous at selling and marketing what they do relative to competitors focused in the US. If I have to look at one more slopped together Indian procurement BPO deck, I think I'm going to cry.

Granted Indian firms may understand the process behind procurement -- and even the technology -- as well as anyone. But they generally stink at articulating their value proposition in a global market. And in a financial situation in which domestic outsourcing companies (or those such as Accenture and IBM which maintain a large on-shore presence) are at less of a price disadvantage against the Indian firms thanks to the dollar's slide against the rupee -- which was the case until two months ago -- the sales and marketing challenge for offshore providers will become increasingly exacerbated. Still, in a market that's expanding at a 27% CAGR, there's room for everyone. Even those outsourcing providers that write PowerPoints with formatting and grammatical issues that would get them fired from a Big 5 firm in a matter of minutes.

- Jason Busch

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