Critical Lessons From the Services Procurement Trenches and a Successful Deployment

Earlier in the summer, I spoke to a reference from one of the leading companies in the services procurement sector. If I named this reference, it would be a company that you would immediately note for its reputation as a procurement leader in its industry, especially around supplier management and supplier performance management practices. In other words, here was a company that already had tackled and moved to the front of the Spend Management pack in other areas and later chose to focus on services procurement -- a trend that I think we're starting to see more of as procurement organizations expand their influence and footprint into new services categories both from a sourcing and overall category management perspective.

Since I've already discussed this provider's references previously -- and I want to be fair to the other companies in the market by providing equal coverage in these initial write-ups -- I'll refrain from naming the provider here. But the reason for discussing this organization's experience is not to critique or lavish praise on a single VMS or MSP provider. Rather, this particular reference really helped to crystallize my thinking about how companies can best leverage third-party technology and services to realize hard dollar savings and improve their overall services management processes, driving new efficiencies while aligning the goals of internal stakeholders (e.g., IT) with those of procurement and HR.

In this particular case, the reference I spoke with was relying on both an enabling VMS platform and MSP services offered in what they described was a clear "vender neutral" setting. Initially, they were able to get their first categories up and running from both a software and overall administrative management oversight perspective in a matter of month (the individual I spoke with in this case recommended that companies budget, in general, 9-12 weeks to get a new services procurement initiative off the ground, including the time required to initially educate and win over internal stakeholders). But his most important advice to Spend Matters readers is to think beyond the application or platform itself. "It's not about the tool, it's about the process".

In fact, their provider came in quickly, hitting the ground running with both a technology roll-out and parallel sourcing efforts, but this company actually slowed things down intentionally to make sure they were putting in place the right change management systems they needed. Specifically, the organization wanted to focus on communicating how the new programs and technology would impact the organization and how team members could best take advantage of the new way of acquiring third-party services.

The Director of Services Procurement that I spoke to inside this organization was quick to emphasize the separation of Church and State when it came to process ownership and execution of the services Spend Management program. "We own the process change and change management. They administer it. If something is not looking right, I expect the MSP to tell us the issues, but ultimately, I'm the one who has signed up for the results." To keep tabs on how things are going, the internal team oversees a governance committee and expects to learn the latest updates, based upon weekly status reports, from their provider.

The procurement organization maintains its involvement with the process to protect its interests as well, especially in the wake of what happened at Chimes. In their words, "By defining the process and owning the data, we could shift to another VMS and MSP provider if needed. We treat our current provider like any other supplier. They are no different. They are a vendor. You've got to be prepared and to make sure you have contingency plans in place. The best way to do this is to own the process first which allows you to transition it if the need ever arises."

In terms of overall results with the program so far, the company is content riding benchmark pricing down in the market provided they can meet quality, performance and other non-rate based benchmarks (in addition to making sure rate cards are competitive with current market rates). Most recently, the company saw a 6% decrease in rates over recent quarters as the economy turned (for highly skilled contingent labor). The provider did the benchmark for them on the state of the market and subsequently adjusted the rates of current and new contracts accordingly. Still, the organization is careful to make sure it gets both the best talent along with fair pricing. While it might be difficult to justify premium rates in all cases, the program engineers included the flexibility to look beyond the low-lying rate where talent is a differentiator to the business.

Jason Busch

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