Sourcing Managed Services: Not Consulting – Not Outsourcing

I recently connected with an old FreeMarkets colleague who is running a managed services business in the sourcing services area. His firm has roughly 90 (full-time) staff, a number that is expected to expand to 150 in the next few months. On a 4:30 AM shared ride to an airport, I managed to muster up enough pre-coffee energy to ask him a question that was on my mind.

I wanted to know how managed services fit into the procurement (and procurement transformation) talent equation, and whether they could actually detract from an organization’s capability to build capabilities and talent that are able to influence stakeholders and effectively engage suppliers to drive savings and other outcomes. For those new to the topic, a range of providers offer procurement managed services, including consultancies and BPOs. These include Accenture, Denali, Deloitte, Infosys, GEP, and Procurian.

His response – extremely lucid for the pre-dawn hour – was quite insightful. But before I dig in, it makes sense to define what a managed service is and who does it.

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