Everest's Latest Procurement Outsourcing Views — Which Providers Will Win and Much More … Part 2

In the first post in this series, I summarized some of the key findings from the latest Everest Group research report in the procurement outsourcing market. Today, we'll continue the discussion, featuring some the thoughts and analysis of Saurabh Gupta, who led the research effort for Everest's study. As a summary observation, Saurabh told Spend Matters that the walls of procurement BPO are in the process of blurring, as "procurement offerings are also expanding into adjacent supply chain services such as supply chain planning, asset management, fulfillment and logistics, and after-market services." Transactions are largely still services driven and customized around a particular need, yet "the number of platform-based PO (or BPaaS) contracts more than doubled in 2010 compared to the previous year." If you haven't a clue what BPaaS is -- trust me, you're not alone -- Alsbridge explores the topic in more detail in this article.

I asked Saurabh what role he thought saw technology playing in procurement BPO transactions and he suggested that it's "playing an increasingly important role in PO as few organizations (even the large ones) have an existing mature and consolidated procurement technology especially on the sourcing side." Specifically, "Clients are increasingly leveraging service providers' add on tools to augment/plug gaps in their existing procurement systems. SaaS-solutions are playing an important role here," as are the "platform-solution" mentioned above. Spend Matters own experience in the area suggests procurement BPOs are continuing to partner on the sourcing and spend analysis side of the equation with targeted vendors (e.g., Emptoris, BravoSolution, Ariba, Spend Radar, BIQ, etc.) and deploy these tools internally. However, when it comes to P2P systems and partnerships, multiple models have emerged ranging from agnostically supporting various client systems supplemented with internal capabilities (e.g., ICG Commerce) to offering full-blown, customized and hosted P2P deployments built on SAP technology (e.g., CGE&Y, Hubwoo/IBM).

Next, I asked Saurabh which providers he thought were in the best position to take advantage of the evolving marketplace. Here, he suggests that "Accenture, IBM and ICG Commerce continue to be the leaders in the PO space but the options for prospective PO clients are much more today than a few years ago." Further, Saurabh has "seen a much higher level of commitment to PO services than in the past." These include: "organic investments (e.g., Infosys has started an internal procurement academy to build sourcing and category expertise, TCS investing in platform-based PO services)" as well as "inorganic investments (e.g., CGE&Y acquiring IBX, Accenture acquiring Ariba's sourcing services and BPO)." Moreover, partnerships are also helping shape the landscape.

These include "ICGC-Genpact, HP-GlobaleProcure, TCS-Denali, and Steria-HPI, among others." The bottom line is that "dependent on what the client wants, there are options available today." To these observations, I would also suggest there's been an increased blurring of the line in some of these providers between consulting, staff augmentation and outsourcing. To wit, I can now contract with Accenture in three or more ways to get the same job accomplished. For example, in the marketing spend area, I can hire them as consultants on a SOW basis to carry out a traditional cost reduction project targeting improvement with a company's agency of record. I can also hire their resources as staff augmentation for a set period of time. Or I can outsource the category entirely. And in the case of marketing spend, specifically, I may also wish to consider working with the Accenture Marketing Sciences team, which is a different group/P&L entirely.

As you can see, the choice of engagement approach -- even within the same firm, targeting the same area of spend -- can vary dramatically!

Stay tuned for our final post in this series interviewing Saurabh. In the meantime, for further reading on the subject of procurement BPO, you can download Spend Matters and HfS' latest joint research on the subject for free:

Designing an Optimal Procurement BPO Program: Process Expertise and Realized Improvement
Tips for Making the Promised BPO Benefits Real -- Alignment, Focus and Integration

Jason Busch

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