Jason Busch at Spend Matters provides his perspective on Phil Fersht's commentary that "Procurement Outsourcing (PO) will continue to be adopted at a slow, but steady pace".
Jason feels that most outsourcers do not get it that procurement "is a giant lever not just for cost, but for overall risk management and even company innovation as well."
Well, it is bundled under BPO, with a focus on P for Process. That to me, the process knowledge, is the easy part of Procurement. You can templatize RFPs, you can codify how to do reverse auctions. To me the big missing link is domain, or commodity and marketplace, knowledge.
From my narrow vantage point, I see our clients look to us to bring them unique and evolving software licensing nuances. They look for advice on obscure outsourcing providers in far flung corners of the world. They look for advice on customizing the standard RFP template in new technology areas where they have little experience. I say our perspective is narrow because we only help clients with technology and telecom spend. Only 2-3% of revenues in most industries. But as readers know, even that has a whole bunch of niches and thousands of vendors. I would be lying if I said we do not struggle to keep up with the breadth and rate of change even in that narrow focus.
You need similar domain knowledge around other spend categories - from print supplies to ball bearings - to offer to do value added PO. And be independent in doing so. Many of the PO firms like HP and Accenture also have technology implementation practices and related conflicts of interest.
While lack of domain depth is a serious issue in the outsourcing industry today, I am not convinced many buyers have the expertise in-house either in many spend categories. As I wrote in this note
much as they hate to admit it, procurement is outgunned in many negotiations - to me a sign of insufficient market intelligence. Rarely do I see procurement groups who are keeping up with innovations in different categories - and going to their peer executives with new ideas. If anything, their preference for "vendor consolidation" often locks out creativity that newer vendors can provide.
Frankly, I would like to see more "internal outsourcing" - let the CIO better control technology spend, marketing control advertising spend etc. They are much closer to the domain, and can use spot assistance from small firms like mine to improve their market intelligence. Procurement, in many organizations, would consider this a challenge to their manhood. But it would be far better than having the process outsourced, and still end up without the domain knowledge which provides the real edge in economics and innovation.
