Growing the Market Pie: Expanding the Definition of Procurement BPO (Part 3)

Please click here for the first and second posts in this series.

In looking at what fits into the current procurement BPO box -- at least by popular definition, not the expanded one we considered earlier in this series -- we see five distinct categories of solution: sourcing/category management, vendor management, P2P, transactional buying and AP/payment. The final two, transactional buying and AP/payment, are probably closest to what many have thought of traditional multi-tower BPO projects involving procurement in the past. Yet arguably, these are the least exciting areas to focus potential procurement BPO investment on.

Sourcing and category management is the area where we've seen the most activity in the past eighteen months. However, unlike strategic sourcing services as delivered by consulting firms, BPOs aren't just signing up to deliver a service (or even just deliver a result which they'll invoice against, like contingency cost reduction consultants). No, BPOs in this case are signing up to manage more than just a sourcing event and one-time cost reduction program. In many cases, they're signing up to manage the lifecycle of a category, from up-front analysis through to year over year cost management, compliance and second-level cost reduction opportunities in the out years (either through supplier development activities or other means).

In the future, we expect the sourcing and category management category to more broadly encompass category analytics as well -- insight as a managed service, if you will. This is already happening in the best of cases with marketing spend, where BPOs are more effectively managing agencies of record by arming themselves with the same (or deeper) level of insight into the performance and returns of different campaigns and programs, digital and beyond. We're also seeing the seeds of a much larger analytics tree being planted with the Opera and IBM-type visions for the sector (which involve the intersection of big data, spend analytics, category specific expertise and ongoing compliance).

Stay tuned as we investigate the other areas of "in the box" procurement BPO.

- Jason Busch

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