By Dan Berthiaume
Procurement BPO has matured significantly since its beginnings as a means of moving low-complexity processes to cheaper offsite locations. It is now moving beyond those “lift and shift” beginnings to become more focused on capability growth and expansion.
Contract Management, Transactional Procurement Have Highest Implementation Rates
According to a new global survey of procurement executives conducted by sourcing advisory firm ISG and sponsored by procurement outsourcing provider GEP, “Value Trends: Procurement Outsourcing,” procurement BPO has grown significantly since 2008, with contract management and transactional procurement have a higher adoption rate for procurement BPO, as 14% of respondents report they have fully implemented these services.
In comparison, 12% have fully implemented spend analysis, while only 7% have fully implemented procurement sourcing and vendor management outsourcing. In general, the greatest percentage of procurement BPO buyers preferred multifunction service providers who provide both procurement and other services. Those who leaned toward multifunction providers tended to have a higher focus on reducing the cost of procurement and a lower focus on achieving sourcing savings.
Procurement specialist providers were the clear preference among respondents who ranked the achievement of sourcing savings high. The chief driver among CPOs was adding staff/capacity, while the chief driver at the manager level was process best practices. Overall, the highest percentage of respondents (23%) listed improved focus and skills needed on sourcing and other subject matter expertise and the need for process best practices to better support business as top procurement BPO drivers.
Procurement BPO Satisfies, Crosses Functions
The majority of respondents with experience with procurement BPO were satisfied with the services that they received, with less than 10% expressing dissatisfaction with any service except contract management, where dissatisfaction levels were 18%. In addition, most respondents indicated a high degree of cross-functional collaboration in selecting a BPO solution.
ISG analysis indicates this is consistent with the more general need for procurement to be collaborative with multiple stakeholders so it can be successful in driving adoption and savings across the corporation. Therefore, it is not surprising to see procurement involving other stakeholders in the decision to select a BPO procurement solution.
However, when it comes to final authority to make a decision on selecting a BPO procurement solution, survey results show the CFO or CPO is the primary decision maker for procurement outsourcing at almost six in 10 (57%) respondent organizations The CFO is clearly the most popular choice to make the final decision, as 36% of respondents said this executive role makes the call.
Another 14% report their CEO is the primary BPO procurement solution decision maker. In all three of these cases, ISG says a common driver is presumably driving financial impact to the bottom line. However, beyond this common interest, ISG notes that CFOs are highly focused on financial controls, transparency and risk, while CEOs are often focused on acquiring strategic capability, enhancing organizational agility and improving the enterprise’s ability to support entry into new markets or geographies. CPOs tend to be motivated by pursuing strategies to accomplish the strategic and operational mandate assigned to procurement with finite resources.
Editor’s Note: BPO Outcomes will review more findings from this report in an article next week.