The state of services procurement technology (Part 1): How low services-spend visibility and generic tools hamper procurement performance

Organizations spend tens of trillions of dollars a year globally on services. It’s no surprise why: The world is shifting from a goods- and manufacturing-based economy to one where outcomes are delivered “as a service” — whether that’s traditional labor, complex services (e.g., outsourcing, professional services) or even the outsourcing of goods production through contract manufacturers. In sum, services account for an average of about 50% of spend on third-party suppliers, ranging from 20% to 80% depending upon industry and specific organization.

Because of this vast overall expenditure and the distributed nature of services spending throughout the enterprise, there are potentially significant opportunities to reduce the cost of services. What’s more, in many organizations services spend control/authority is, in practice, distributed across the organizations’ functional units (e.g., legal, marketing, etc.) and involvement of procurement can be limited or even resisted. This creates not only opportunities to obtain savings but also to improve services outcomes by increasing visibility into and rationalizing and automating processes.

Yet the question then becomes how to obtain these improved results. Over the past several years, procurement practitioners have told us repeatedly that processes and technology for management of services are not as robust as those for goods and materials, meaning there is much more to do to gain better visibility, influence and control over services spend. Despite the tens of trillions of dollars organizations spend on services each year, how organizations use technology to support their sourcing and management of services has not been analyzed to any meaningful extent.

To address this, Spend Matters and SIG conducted a survey of procurement practitioners to start to answer this and other related questions. In this Spend Matters PRO brief, we take a specific focus on a section of results as it relates to services spend influencers. The analysis examines the varying perspectives of respondents with high and low services spend influence, using their divergent pain points and approaches to this mega category as a method to unveil applicable lessons for driving better services spend performance. It also explores the types of technologies each group currently uses to address different types of services spend, as well as each group’s relative level of satisfaction with their current toolsets.