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Trapped by Procurement BPO – Pull Out of the Mire

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Published:  May 18, 2012
Access Level:   Free
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We've been holding our collective breaths since about 2005, waiting for a barrage of giant Procurement BPO deals to clutter the analysts' quarterly listings. Yet when it comes to larger BPO outfits in particular, big engagements are still few and far between, with only a few definitive new contracts announced each year, most often focused on direct spend or sometimes pseudo-Procurement engagements pretending that accounts payable can be spun as a "Procurement outsourcing" gig. Part of the challenge holding back Procurement BPO growth from what it should be is that it's a market myth that Procurement is an "easy-peasy" function to source and implement. After all, carving out a corporately centralized process with some imposition of rules and hopefully a few tools should be a piece of cake to convey to a third party, right? Not exactly. Procurement BPO presents a minefield of challenges right from the start. And only the few who have been brave enough to implement it across the enterprise are much the wiser. This paper explores the traps that every CPO should think about when considering a procurement BPO program.

If you can navigate the Procurement BPO mind fields, there's hope, though. What's clear from our analysis is that deep category and process expertise on behalf of the provider often combined with enabling solution capability—or at least the ability to act as a data steward for relevant sourcing, spend and supplier information and apps—is what separates strong procurement BPO engagements from the rest. That, and a healthy dose of skepticism and a "show-me" approach from the client at the outset, which leads to significant hands-on involvement not only in "train-the-trainer"-type initiatives, but also change management and continued collaboration with a BPO partner.

Procurement BPO is a bit like a secret society -- you can't experience it unless you're in it. Consider that one of Procurement BPO's secrets is that in a multi-national organization, there are always winners and losers. Harmonizing Procurement processes, service levels and technologies across the globe means that more evolved countries may miss out, taking a step backwards when it comes to BPO implementation. And if the rules hold, these evolved players will run the territories with the greatest spend. At best, local Procurement leaders (and their customers) will grudgingly buy in to the fact that harmonization and standardization is ultimately for the corporate good. At worst, these organizations will balk at scrapping years of investment in technology and processes and regress.

The main body of this Spend Matters Compass report explores challenges and common pitfalls to procurement BPO at all points in the decision and implementation process -- from initial design through to sourcing, transition and steady state operations. After examining each of these areas in details, it concludes with a number of key recommendations. Among these:

  • Do more in change management before and after the outsourcing. In hindsight, nearly all BPO adopters have said they should have done more.
  • You wouldn't select a fabulous viola player to teach you guitar; process experience (metaphorically knowing a "string instrument" in this example) matters little compared with deep domain knowledge from the provider.
  • Think about all of the stages of the BPO process both discretely and as one -- from initial sourcing and strategy development to transition, steady state, and ongoing vendor management, each stage brings critical nuance and importance in getting the most from relationships and avoiding potentially costly missteps

Any executive who is remotely considering a Procurement BPO engagement should stop what they're doing immediately and download this report. We promise that it will open your eyes to all of the important areas to focus on to avoid getting trapped and stuck in a procurement outsourcing quagmire. Spend Matters would like to extend a special thanks to our friends at HfS for leading this research effort and analysis.

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