Subadhra Sriram's Blog

Tra La La La La: Why Services Procurement Strikes a Chord

Suppliers and customers are all raving about services procurement. But here’s the catch: It means different things to different people. So I decided to explore this term a bit by talking to a number of people in the know. After chatting with various industry folks, I think Agile-1’s chief sales officer, Stacie Habegger, said it best: “Services procurement encompasses the strategic management and procuring of complex category services like contract labor, consultancy services, marketing, print, travel, telecom, legal services, etc.”

The key word is services. It’s different from needing, say, 100 copiers or even 100 people. It’s not tangible merchandise. And this could be handled via a statement of work agreement or even a master service agreement, depending on the contract, says Beeline’s Colleen Tiner, VP of product management.

So why is this a big deal? Word on the street is that it represents 50 percent of corporate procurement spending. We are talking about billions of dollars. At this point, customers do not have the same clarity on what they spend on services compared with material goods. And if customers can develop a centralized strategy to procuring these services, it will result in savings for them now and over time.

And for the supplier, these savings could mean more business. “Centralized procurement results in a lower cost of sale to the supplier. Once a relationship is solidified and with insight to historical success, the client is more likely to re-engage with that supplier when additional opportunities arise,” says Habegger.

Ditto for the managed service provider. With services procurement, both sides of the staffing equation have something to gain. It only requires that we are all on the same page when it comes to explaining the terminology.

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Mr

Ted Weyn 11/30/2011 02:11 pm

From HCMWorks' perspective the definition you provided is accurate. This is the way that the majority of procurement professionals will look at services procurement or even, what's called, Indirect Procurement. The basic defintion between direct and indirect is that any purchases that directly impact the cost per unit (CPU)of the product delivered by a company is considered direct. i.e. steel to an automobile manufacturer. Any costs that "indirectly" impact the company's net margin is deemed indirect. Services corporations like Banks, Insurance companies, etc, arguably only have indirect spend.

The last comment I'll make is that "staffing companies" and VMS tools that only do temp labor and/or SOW type of spend, need to stop calling themselves Services Procurement. Until they can handle services like print, marketing, call centers, etc. They should not portray themselves as "service procurement".


AVP IT Procurement

Gini Wright 11/29/2011 05:11 pm

Well written article. Thank you!!


Total 2 comments


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