The Great Procurement Services Market Mashup… and Land Grab

In Part 3 of our market predictions coverage (see links to the full series below), I talked about the industrialization of business services and how procurement will be increasingly taking a proactive role in shaping the business process sourcing decision. As services spend under management increases, it of course leads to more services procurement, and procurement organizations will be looking at services spend beyond the traditional category taxonomy view of world in order to squeeze more value out of it.

Spend is highly multi-dimensional and shouldn’t only managed in one way for one single rigid spend taxonomy. For example, if you started your taxonomy with services spend versus non-services and then decomposed your services spend into various services sub-segments (e.g., contingent labor, BPO), you’d likely find that procurement is not leading the discussion and generating enough value at such a “mega” category level (e.g., helping to strategically manage multi-tower BPO spend).

Well, one area where procurement can have more impact is to look at its own spending across these external services spend categories. In some of the webcasts we have done with our PRO subscribers, we’ve shown our integrated procurement services coverage model, and one of the trends that we expect to see in 2014 is the building or buying of capabilities by procurement services players (including application services – i.e., SaaS) in adjacent segments to theirs.

We expect to see industry restructuring in many places:

  • SaaS players looking to generate revenues from insights gleaned from their customers’ data (SAP placed a $4.3B bet with Ariba on this one) and partnering with third parties far beyond the usual D&B type stuff.
  • On the other side of the spectrum, we expect large BPO players to acquire small technology and managed service providers to bolster their services capabilities and have native technology capabilities not tied to large commercial software packages. For example, GEP is a prime target for acquisition because of its surprisingly good native technology capabilities and how it has integrated that technology into its end-to-end services platform.
  • Subscription-based advisory services firms will offer deeper technology, content, training, and transformation capabilities. Similarly, big consulting firms will continue to build or acquire their capabilities that offer more user-friendly and cost-competitive subscription-based advisory and training options in hopes of converting clients to larger transformation deals when the need arises.
  • The services procurement market will undergo restructuring as service procurement / management tools (e.g., “Vendor Management Systems”) and the service providers who use (and/or provision them) will place their bets on who will be the winners and losers – and who will be their partners. We expect some big announcements from the major VMS providers, including some potential IPOs that could prove to be very interesting. Stay tuned for WAY more on that.
  • Finally, consider market intelligence. For procurement, this means supply market intelligence, and since procurement organizations need to raise their game in providing supply market intelligence themselves, they are going to be looking more and more to third parties for generating efficiently and effectively that intelligence in a way that transcends some of the legacy KPO based approaches in the marketplace (for more on this topic, please see The Future of Supply Intelligence will be Built on Advanced Technology, Not PowerPoint).

There are many more cross-over areas and we’ll be developing the “meta market intelligence” this year to examine how the procurement services sectors will be interacting and evolving – as well as how the players in those segments will likely be evolving. It is important for practitioners and providers alike to consider these trends as they scenario-plan how they will natively provide and/or partner in these various procurement/supply services.

This is especially relevant since the line between provider and practitioner is blurring. In fact, the subject of our first two predictions (and related 2014 planned research coverage) dealt with this topic of procurement organizations formalizing how they will become stronger service providers not only to internal clients, but also external customers. In my next prediction, we will focus on the emergence of brick-and-mortar players in the supply chain as broader service providers.

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