Infosys/Procurement BPO: Services Expansion/Platform Growth as Proxies for Broader Markets (Part 3)

Please click here for Part 1 and Part 2 of this series.

Nearly all procurement BPOs claim material differentiation through the category expertise they bring to the spend table. Infosys is no exception but they've taken a slightly different route in this regard. We have often seen other procurement BPO providers taking a route of alliances/partnerships to bring category expertise. Infosys has been making investments steadily to build category expertise in-house, which has gained rapid momentum in the eighteen months, and is also evident with their recent acquisition (keep looking for our detailed analysis on this in the next couple weeks).

During the past year and a half, Infosys has built category management capability in North America and EMEA by setting up global commodity councils across major spend category domains -- with dedicated category management consultants being on-boarded across NA and EMEA. In total, Infosys claims over 500 sourcing members of its global procurement team focused on category management, although the vast majority are based in India. Infosys typically focuses on a hybrid global delivery model with both onshore and off-shore resources, but given the benefits of centralization for category management and sourcing, nearly all of these resources are based out of one geographic market (in this case, India).

Under the umbrella of its category management services, Infosys focuses primarily on a handful of key areas. These include an upfront opportunity identification framework to help unearth savings opportunities (including but not just limited to total cost analysis/savings, spend consolidation/aggregation, supplier rationalization, etc.). Next, Infosys delivers a sourcing strategy framework not all that different from traditional 5-8 step sourcing models espoused by consultancies. The key here is process consistency taking into account category nuance and specific industry requirements that might be layered on top. As part of the category management process, Infosys also delivers a sourcing wave plan with opportunity prioritization -- similar to how nearly all the BPOs think about savings and value realization plans over time.

On a slightly more differentiated basis, Infosys also delivers end-to-end category lifecycle planning and transaction management capability across different spend areas. For basic indirect spend (e.g., office products, IT hardware), this end-to-end execution and management capability is linked to their SAP and Ariba transactional. But for more nuanced complex indirect and services categories, Infosys embraces a niche technology platform approach (e.g., for contract labor, T&E, telecom expense management). All of the services are wrapped under functionally oriented steps and areas including integrated program management, demand management, buying (tactical) management and supply/supplier management.

Infosys' category management services span such indirect spend areas as IT products/services, MRO, facilities management, utilities/energy and office supplies. They also cover a range of complex services (and limited direct materials) including telecom and print, fleet/ logistics, engineered and fabricated products (often to support one-off, tactical buys). We have not interviewed Infosys category experts like we have at other firms engaged in the strategic and tactical outsourcing of category management such as ICG Commerce, but based on our interactions over the years and discussions with Infosys' customers -- at their events and other interactions -- it seems they've made a concerted effort to bring a level of sourcing and category expertise that is often lacking with competing, off-shore providers.

Rajiv Gupta, who runs S&P for Infosys' commercial operations in the Americas, told Spend Matters that category management and expertise has been a key focus for not just hiring, but also technology partnerships and platform investment. "I see a natural convergence of investments we make in platform BPO and category expertise. We don't see them as distinct services. It is only a natural progression from sourcing to sustain the value by having an end-to-end category lifecycle management approach from sourcing through to supplier management."

Perhaps this, in part, explains a number of recent 2011 wins and expansions where category management has played a key role in Infosys' ability to deliver on a broader procurement BPO value proposition. Still, we would encourage all prospective procurement BPO customers to engage in careful diligence to make sure their prospective partner not only knows how best to source a particular category -- and brings the right tools and skills -- but also has the soft, empathetic hands to win over key internal stakeholders, especially in the cases of complex services and indirect spend areas.

Check back in the coming weeks as we cover the latest from Infosys, looking at its recent announcement plans to bring the Portland Group into its BPO fold. Portland is a sourcing and procurement services firm with 113 professionals. Based and focused on the Australian market, it had revenue just above $30 million (converted to US dollars) in its latest fiscal year, which would put it at less than half the size of AT Kearney Procurement Solutions by comparison (although on a regional basis, Portland has a highly material share of the Australian market).

- Jason Busch

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