Seven Reasons Complex Services Spend Is Difficult — and Unique! (Part 2)

In the first post in this series, we offered up the initial three items on a list contained in a Spend Matters UK/Europe research paper, Managing Indirect Services -- Procurement's Greatest Opportunity?, describing the reasons complex services procurement is often so difficult (and of course we provided our own commentary as well). Today, we'll feature four additional points from Peter Smith's paper, plus some additional thoughts. To begin, Peter's fourth observation is, "Services are often 'personal' to the budget holder, even in a corporate environment. Personal relationships can add a markedly different dynamic to procurement decisions compared to those made on purely objective business grounds."

And they undoubtedly can. To this statement we would add the importance of pursuing high visibility services categories first, using a thought process like "if it's good enough for the CFO or CIO, it must be good enough for me." This links a bit to Peter's fifth observation, which is that "budget holders for many high cost indirect services are generally senior executives and they will often be dealing with similarly senior contacts in supplying firms. A junior category manager trying to 'tell' the MD that they can no longer use their favourite adviser faces a tough task." This is precisely why we argue that you need both senior advocates and guinea pigs in the organization to go first. It's also worth pointing out that it's often the more quantitative and analytical "junior analyst" type who is best positioned to dissect the overall definition of value and performance for a given services category. And no senior stakeholder, especially those with a consultative background themselves, will be able to dispute this type of approach for long, especially if other executives in the organization have gone first.

Peter's sixth observation is that "tools and techniques (such as 'traditional' ERP technology) that are effective for procuring discrete goods have proved less useful for indirect services, perhaps because they do not fit neatly into the world of repetitive volume purchasing." We have no other comment here other than recommending to our readers to investigate Spend Matters other research briefs and papers on the subject (links at the end of this post), which cover VMS and project-based/SOW technology in relatively extensive detail. Peter's seventh and final observation suggests, "the intangible nature of indirect services means it is often difficult to measure their effectiveness or the performance of suppliers. This can make managing the supplier relationship (and supplying contract) challenging."

To this point, we would add the importance of category-specific technology for managing supplier performance. Take Decideware, a vendor specializing in SPM and relationship management for marketing. They've built a unique platform that really bridges the gap between what an agency of record does and how it reports to and engages its clients over time -- and of course the other way around as well. Most important, it puts category managers for services procurement in this complex category in the relationship driver's seat.

Curious about the topic? Check out our Spend Matters research briefs:

Services Procurement Benchmarking – Truth in Numbers to Achieve a New Level of Program Results

Getting the Most From Analytics and Benchmarking

Jason Busch

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