Procurement BPO – Be Careful What You Sow (And Who Sows It)!

Read Spend Matters and HfS’ latest analysis (authored by collectively by Jason Busch and Phil Fersht) of the procurement BPO market: Designing an Optimal Procurement BPO Program: Process Expertise and Realized Improvement Tips for Making the Promised BPO Benefits Real – Alignment, Focus and Integration – Jason Busch and Phil Fersht Apply Lessons From Dating and Marriage to Procurement BPO Before we get on with the substance of this column, I want to point out that the title refers to planting, as in farming, not a statement of work (SOW). Centuries before the concept of BPO became a reality - that is, if you discount hiring some Hessian mercenary army to do your dirty work - farmers had to contend with the fundamental question of using just their own labor, or that of others (e.g., economists and historians have disproven the economic benefits of slave labor based on productivity, mortality, cost, etc.). Outside of direct ownership, other types of landowner/laborer relationship were often murky in terms of benefits, based on the level of commitment of the actual farmer to the land he tilled. Flash-forward to today and the same could be said of procurement BPO. That is, the actual ownership and leadership a company feels in the process of procurement - especially prior to engaging third parties - is critical to the outcome they achieve in a BPO relationship. Unlike centuries-old farming models, there is no substitute for maintaining process ownership capability, or at least leadership capability relative to handing it off to someone else - fairly paid or not. In short, heed our advice: if you think you can toss procurement to a third party without careful analysis, think again. As Phil and I wrote in our latest research, "the fundamental challenge of procurement BPO in the past was the belief that either the transference of labor from higher to lower cost regions and/or the re-badging of employees from corporate to a BPO alone would be enough to achieve results. This is especially the case where BPO providers streamline transition costs over the duration of a multi-year contract, allowing the BPO customer immediate cost savings and limited (if any) upfront payments for resource investments." "However, while this can make everyone look good in the early stages (the provider rep for sealing a new client and the customer for achieving some immediate cost-savings), these initial cost-savings will slowly creep back if both provider and customer do not invest in new initiatives to improve their overall procurement functions. When you take process work and move it into remote locations, especially offshore, any inefficiencies are magnified if improvements are not introduced." If you’re interested in exploring this topic further, sans farming advice (Phil and I prefer Whole Foods to getting grime under our fingernails), we encourage you to download our free research on the topic: Designing an Optimal Procurement BPO Program: Process Expertise and Realized Improvement Tips for Making the Promised BPO Benefits Real – Alignment, Focus and Integration – Jason Busch and Phil Fersht Apply Lessons From Dating and Marriage to Procurement BPO [eventpdf]

Procurement BPO – Be Careful What You Sow (And Who Sows It)!

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