Procurement services study series (Part 5) — Managed Service Providers (MSP) group’s market detail and 4 provider profiles

This installment of the Spend Matters PRO research series “Procurement Services Market Landscape Report and Directory” continues our analysis of six procurement services market groups that we’ve outlined:

• Source-to-Pay Implementation Providers
• Regional Consultancies
• Managed Service Providers (MSPs)
• Strategy Consultancies
• Global Consultancies (including the “Big 5”)
• BPO Providers

Part 1 summarized the study findings and listed the 34 providers that we’re initially profiling (see our services provider directory to learn more about the providers and see the PDF profiles). Part 2 detailed how procurement professionals can use this information, and it gives more information on the six market segments shown above and the providers in those segments. Part 3 and Part 4 explored the first two segments (S2P consultancies and regional consultancies), and in this fifth installment, our coverage turns to the “Wild West” segment covering various forms of a Managed Service Provider (MSP) model. Part 6 examines four strategy consultancies that offer procurement services to add value. Part 7 focuses on six global consultancies as well as that group's promise and pitfalls. Part 8 looks at the big names in the BPO providers group. Part 9 is the series wrap-up post, which gives stakeholders and CPOs more guidance on the services market and how to use the six types of providers.

MSPs come in a wide variety. In our primary segmentation model of the overall services market, MSPs focus on “operate” rather than “transform,” but they’re also focused on “enable” — i.e., provisioning of digitally enabled resources used in a procurement operating model — whereas consulting focuses on the (re)design of the operating model itself. The MSP segment actually unpacks into multiple micro segments based on process, category, service resource (e.g., data, integration, infrastructure), commercial value (e.g., spend/supplier aggregation as a service), and commercial model (e.g., contingency-based sourcing and value-recovery services).

The promise of this segment in the procurement services ecosystem lies in its diversity to unlock untapped potential in most any process and spend category, but the challenge comes in finding and orchestrating the right services into the desired target operating model and overall transformation. This segment is also by far the most active one and the one being most digitally disrupted as traditional knowledge-based services are being codified into new digital platforms and assimilated into more strategic service provider segments like BPO and management consulting. For example, IT category sourcing advisory services are red-hot right now, and Accenture just acquired a specialist in this area named ClearEdge Partners. We’ll talk more about the IT sourcing services area later in this analysis.

In a sense, SaaS vendors could theoretically be classified as a managed (application) technology provisioning service of sorts, and the software served up as a service could be viewed as a set of tools rather than a service that delivers business process outcomes or capabilities. Yet, SaaS vendors are increasingly focused on selling based on actual value that they (and their partners) can deliver to the business process. And in procurement, this requires knowledge and intelligence that is baked into analytics that help continuously find and deliver that value. This is why niche tools focused on certain process / category segments have always struggled in the market on a standalone basis unless embedded in a broader project-based transformational service or ongoing managed service.

This virtuous convergence of tech and knowledge-based services is clearly a trend right now at the micro-level, but the question remains as to what types of players will be the ecosystem anchors and “platforms.” We’ll address this issue later, but for now, let’s dive into the niches where value is being created within the micro-segments of the MSP services area.