2014 Predictions: The Industrialization of Services, including Procurement Services

Doing annual predictions is always a fun process for analysts, researchers, bloggers, pundits, economists, and anyone who doesn’t feel the downside of making incorrect predictions. In fact, one strategy for analysts is to get fairly outlandish with their predictions so that in the off chance they get something right, they can look brilliant, even though 90% of everything else they said was rubbish. Others take a more conservative approach. They are like momentum investors and are making predictions such as “mobile adoption will increase” or “the supply chain will finally get connected to physical world through sensors, etc.” That’s really throwing it out there, right?

The answer lies somewhere in between aspirational/inspirational and the practical, and adoption will be continuous and not relegated to a single year. In other words, I’ll try not to call 2014 “the year of XYZ.” So, I’m going to outline these predictions as where I think the procurement “market” will go, as in, what types of things will progressive practitioners and providers be focusing on, as well as where we’ll be betting our resources in terms of research coverage and IP development.

In part 1 of my 2014 predictions (which was started as a Christmas list before the audacity to spend time with family rather than the list took over), I discussed how procurement would begin to truly run itself like a business – not for the sake of delivering white glove level service to the business or to get caught up in the “Global Business Services” trend – but rather to practice what procurement preaches and tap third parties optimally to deliver value to stakeholders. It means formally defining, delivering, and evolving a procurement service delivery model that makes sense based on 1) stakeholder needs, 2) procurement capabilities, and 3) third parties in the market. Our job is to help procurement practitioners improve #2 by better understanding and using #3 (in the context of best practices and “next practices”). We will be covering supply service delivery models extensively in 2014.

In part 2, I wrote that procurement can’t do this alone and must work in concert with IT. You’d think that with the pace and criticality of global “corporate virtualization,” Procurement and IT not only would be driving such strategic change individually, but also working well to support each other. Not so! In part 2, I wrote about some of the dysfunction between the two groups and how to help them help each other for the greater good of the enterprise. Spend Matters will also be covering the Procurement / IT integration problem (and solution) in 2014.

For our third major trend for 2014, I’m going to stay with the corporate virtualization theme and look at the industrialization of the procurement and management of services.  Services procurement is just one aspect to managing third party services, or managing contingent labor, if you will. The services value chain is every bit as complicated as the materials supply chain (although in different ways), and is finally starting to get some recognition, especially within the manufacturing supply chain itself. Unfortunately, that recognition has been more about the mismanagement of third-party labor, and it points to a broader problem. Namely, that while we’ve been managing materials supply chains at six sigma levels, we’re managing the services value chain at two sigma levels. So, as such, we’re going to be looking at managing third-party services through the lens of supply chain practices to see how firms are industrializing their acquisition and management of third-party services. For example, consider the make vs. buy decision in the physical supply chain and then consider how it becomes even more complex when we consider the spectrum of labor approaches in services spend.

Of course, one key segment of this services spend management is the area of procurement/supply services. I know that “procurement services procurement” isn’t exactly an intuitive name, but as I mentioned in the above-linked parts 1 and 2, procurement is going to start getting more methodical in how it acquires supply services to embed as part of its own service delivery to internal and external clients.

In conclusion, services industrialization (i.e., how to manage all services value chains with the rigor used in managing industrial supply chains), with a focus on procurement services as a key segment, will be a strong coverage area for us in 2014. If you have some interest or ideas in this area, please let us know how we can help each other this year.