The commoditisation of consulting (& implications for procurement solution providers): Fiona Czerniaswka blogs

My co-author, Fiona Czerniawska (“Buying Professional Services” - available here at a very reasonable price...) writes an occasional but always thought-provoking blog at the Source for Consulting website.

In her latest piece, she explains the three stages of commoditisation for consulting services. Her final argument got me thinking. She says that the final stage of commoditisation occurs when a service, that started out as a high-value consulting-type ‘product’ is seen as just part of the day to day job within a client organisation.  She gives the example of 'change management' - initially, it was a special product that you bought from consultants. Then organisations brought it in house but it was carried out by a dedicated team. Now, in most organisations it's just seen as part of everyone's job.

And that made me think about procurement technology and process, and we have seen exactly the same trend here.  So initially, consultants (or service providers) ran e-auctions for instance. Then, we saw in-house teams set up within many major organisations who were major users of auctions. Ultimately, and we have reached this point in leading procurement organisations, the capability to run such events is part of the core skill set and business requirement for pretty much every category manager.

That explains perhaps why some service providers in the procurement and supply chain field have struggled to combine technology solutions and consulting. You have to keep ahead of the game on the consulting side, and always be looking for the next thing that isn’t being done in house. That’s what McKinsey and others have done successfully over the years.

And it suggests that the same will happen with today's leading edge technology / processes; 'optimisation' for instance.  It will become part of the procurement manager's personal skill set in time.


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Voices (2)

  1. MarketDojo:

    There is also a great parallel to the engineering simulation market. Engineering simulation was initially in the hands of the academics (Finite Element Analysis, Computations Fluid Dynamics) but through the last twenty years has passed down via software, which has become more intelligent, to the specialist engineers. It has then become part of normal practice for many engineers and some elements have even found their way into the hands of designers. And as the skills have been transferred to the in-house users, the consultancies have had to diversify into even more specialist areas or helping with the whole environment and passing information between different software programs [Similar to the issue now of linking up software applications across the whole e-procurement environment].

  2. MarketDojo:

    Commoditisation is a word that we use a lot, mainly because we believe, as it seems you do too, that e-auction services and technology is indeed a commoditised entity. That said, why is it not entirely treated as one by providers in the marketplace? E-mail, CRM and Accountancy packages used to be premium technology, yet look what commoditisation has brought to those areas in the form of Google Mail, Zoho and Clearbooks. What do these commoditised tools have in common? A website that clearly lists Benefits, Features, How it Works and Price. They also go against the heavy-weights by offering a simple, easy-to-use application that does the majority of the things you need it to and leaves all the complex, rarely-used stuff to the clunky outfits.

    Surely if e-auction software is also commoditised, all providers should similarly take this “web application” approach?

    And so, once we started exploring the market, we’ve found that actually we are still climbing the s-curve. The market is not commoditised as yet and we still discover $1bn + organisations – leaders in the respective fields – using e-mail to handle RFQs and tender activities.

    Therefore I think we are still a few years away from true commoditisation and I’m glad that we have geared ourselves entirely for that, as it is inevitable.

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