{"id":3761,"date":"2016-11-08T00:00:00","date_gmt":"2016-11-08T00:00:00","guid":{"rendered":"http:\/\/localhost\/projects\/horsesforsources\/dynamics-paas\/"},"modified":"2016-11-08T00:00:00","modified_gmt":"2016-11-08T00:00:00","slug":"dynamics-paas","status":"publish","type":"post","link":"https:\/\/www.horsesforsources.com\/dynamics-paas\/","title":{"rendered":"How As-a-Service Coming of Age Changes the Dynamics in the Procurement BPO market"},"content":{"rendered":"

<\/p>\n

Procurement BPO has seen a more rapid move to “As-a-Service” — agile and on-demand — than other horizontal offerings. At the center of this movement is the maturity of procurement platforms and networks such as Ariba, Coupa, and GEP, the high degree of automation due to the transactional nature of large parts of the outsourced work, and increasingly strategic use of talent with subject matter expertise. These elements have led to more productive and “intelligent” operations. And at the same time…procurement outsourcing has become cheaper.<\/p>\n

The increasingly common use of technology platforms, as well as maturity and confidence in service delivery, has driven down the contract value of procurement BPO deals. In the early days of procurement outsourcing labor-based deals often exceeded $100 million, this number dropped steadily to $50-60 million (five years ago) and currently sits between $25-30 million over five years. Growth dropped in five years to single digits from 12-15%.<\/p>\n

Service providers have needed to develop and invest in a strong vision for procurement to drive change on themselves, or risk getting stuck in labor arbitrage. Bringing together an understanding of clients and technology plays a role of paramount importance in continuing to deliver on rising expectations.<\/p>\n

A recent HfS Study on Intelligent Operations<\/a> found the most important driver outsourcing is to drive up productivity. One in six respondents at the SVP level or higher, sees replacing their current (legacy) provider with one that is driven by As-a-Service (they’re more flexible, employ better use of technology and talent) as the way to get to this Intelligent Operations end-state. In this service engagement users in the enterprise get a better user experience—potentially resulting in more compliance, better stakeholder relationships, and stronger business alignment. We are currently exploring these stories and examples in our current research to be published later this month in the HfS Research Blueprint on Procurement Operations.<\/p>\n

Moving to As-a-Service will lead to new opportunities and profitability for buyers and providers<\/strong><\/p>\n

Service providers are focusing on how to increase the value of their offerings to service buyers, and sustain their position in the market by investing in strategic sourcing and category management, areas that require higher skilled talent and are less suitable for Robotic Process Automation…and with potential for cognitive solutions. One service buyer we spoke with during our Procurement As-a-Service Blueprint research mentioned the big value she experiences from her service provider is a constant dialogue bringing new ideas about the future of procurement and challenging the current mindset and procurement operations model, focusing on more alignment with business stakeholders. In this particular engagement value add in service delivery has shifted from an execution focus to a strategy driven partnership approach.<\/p>\n

Thus, procurement is a valuable area for many service providers and buyers. Buyers report more flexibility and scalability in their operations and experience more innovative input from their As-a-Service provider. And, some providers report achieving double-digit growth in the practice at the moment due to more technology in delivery—nonlinear growth. It’s a change we anticipate seeing more of in the outsourcing services market.<\/p>\n

What to Watch<\/strong><\/span><\/p>\n

With the impact of the As-a-Service journey firmly visible in the industry, we stay focused on some key questions for the procurement services: <\/p>\n

Has the downward spiral in procurement BPO contract value reached the bottom? How are service provider – service buyer expectations and relationships changing? Will we see service providers create new growth with Procurement As-a-Service delivery and commercial models? And will buyers get the support they need from As-a-Service providers in building Intelligent Operations? Stay tuned for more.<\/p>\n","protected":false},"excerpt":{"rendered":"

Procurement BPO has seen a more rapid move to “As-a-Service” — agile and on-demand — than other horizontal offerings. 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