Three Ingredients Missing in the Procurement BPO Secret Sauce

I've spent a fair amount of time in the past few months digging into different procurement BPO models. In general, I've been moderately to seriously impressed with the level of process innovation that many firms aren't just claiming, but actually introducing into their client bases. Still, a number of things appear to be missing, especially among larger offshore providers and the onshore firms without extensive consulting experience. These are almost all soft factors that any company executive evaluating procurement BPO options would be wise to consider. In no particular order, these are the three ingredients that all procurement BPOs should sprinkle into their particular secret sauce:

Empathy -- Process excellence, technology know-how, category depth, analytical horsepower and just about any other BPO asset will inevitably fail to fully deliver on promised claims unless the people behind them have empathy for those on the other side -- including procurement, business stakeholders (e.g., finance, IT) and suppliers. Knowing exactly what it means to sit on the other side of the table in someone else's shoes in a Western negotiation, stakeholder management and supplier management context is a feat that's difficult to duplicate offshore (and even onshore, for that matter) unless the resources dedicated to a particular account bring first-hand and significant consultative experience. In this regard, I'd almost rather see BPOs shut up about how good they are with their process models and take some active listening classes. It would go a long way.

Taking a more aggressive POV around technology -- Let's face it: many BPOs pussyfoot around the technology issue, afraid to rock the boat. In my view, BPOs should come with their own preferred vendors in areas like EIPP/invoice management (to drive working capital strategies rather than just eliminate A/P headcount), sourcing and optimization, supplier management, supply risk management, spend visibility and contract management. When it comes to eProcurement, I also think BPOs are afraid to take a strong viewpoint and stand up to ERP bigots about what's going well and what's not working. I'm also not sure I think that BPOs as general contractors for technology hosting providers are necessarily doing a positive service for their clients. It's best to have internal capabilities for this and/or bring their own direct partners (i.e., the software providers) to the table directly.

Selling the afterlife of procurement BPO -- Despite falling back on hard numbers, I think one of the reasons that only a minority of procurement BPO RFIs end up resulting in signed deals is because providers lack clarity in selling the soft elements of the BPO afterlife. As my good friend Brian Sommer likes to say, it's essential when pursuing a missionary sale to act like televangelists, metaphorically convincing your audience to give away their credit card numbers in the spirit of some abstract concept even before they've dipped their toes in the water with a proof of concept or pilot. The afterlife is lacking in the BPO sales process -- especially the soft afterlife. I think as procurement BPO matures and companies begin to see the benefits of building stronger business cases that rely as much on softer factors as cost savings (e.g., supplier performance, supply risk management, etc.), that providers will improve at building these less-than-quantitative messages about the afterlife.

In any event, these three ingredients are but a quick list that I think BPO providers should consider adding to their BPO recipes to get a more memorable result. I think the concoctions that are making it onto the menu are getting better every year (and some providers are pushing super-size me deals at prices that suggest they're buying the customer to build their practices). What do you think BPOs must do to better get their overall message across and drive both further interest and signed deals in the procurement area in 2010 and beyond?

- Jason Busch

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