The Procurement Services Market Landscape Report & Directory (Part 2)
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In Part 1 of the Spend Matters PRO series “Procurement Services Market Landscape Report and Directory,” we started with the chief procurement officer (CPO) essentially being the “CEO” of a spend/supply management services business. This business includes seven major service areas:

  1. Strategy and operating model design and transformation led by the CPO but guided by the business. It determines which set of services are most needed by the business, the use cases for those services (e.g., FP&A, S&OP, M&A, customer-led digital transformation, “one company” initiatives, resiliency improvement, ESG efforts, NPDI support, ERP implementations, etc.), the assessment of the ability to support and even influence those business strategies, and then a target operating model and portfolio of programs/projects (including capability improvement projects surrounding talent, digital, or certain processes or spend/supplier categories).
  2. Knowledge-based category management services for major spend categories and associated stakeholders in order to organize both around supply markets but also to align tightly with critical functional partners that are also supporting business strategies and driving their own services and strategies.
  3. Operational services for category/‘super-category’ execution that align to the strategic category management services and other corporate requirements (e.g., risk management), including sourcing execution, supplier relationship management and contract/commercial management.
  4. Transactional services (e.g., P2P) supporting the above requirements with a focus on moving toward low/no-touch guided processing, an intuitive self-service UX, and fail-safed fraud/compliance monitoring.
  5. Joint services with functional partners in departments like finance, IT, risk, HR, legal, operations, etc. rather than just helping them manage their spend and suppliers better.
  6. Agile product and service (internal/external) development working closely with IT (and broader “digital” strategy/transformation groups) and the service provider ecosystem that your company has built up, whether methodically or ad hoc, for new strategic processes and programs being invented on the fly.
  7. Enablement services delivered through a center of excellence (CoE) within procurement or at the enterprise level — e.g., via a global business services (GBS) model.

It is hard to overstate both the importance and the complexity of these services in industries where supply chains and suppliers are so volatile and complex right now, and the fact that there are so many internal stakeholders and external technology/service suppliers that have their own ideas of how they plan to run their own services and ecosystems.

There is massive complexity here, but also massive opportunity. It’s a chance for CPOs to build out their services business on what they really need: a next-generation Procurement-as-a-Service Digital Platform (which doesn’t really exist yet) in the broadest sense — i.e., the ability to mix and match processes like Business-Process-as-asService), enabled by highly modular SaaS, built on emerging application Platform-as-a-Service (aPaaS infrastructure such as low/no-code tools), iPaas for integration, DaaS for outside-in data/intelligence flows and underlying infrastructure.

To build this out, CPOs are going to need a lot of help from the procurement “XaaS” ecosystem, even though that ecosystem is highly in flux. And this problem is an even bigger issue for the services providers, which are either supporting pieces of this puzzle or are tasked with assembling this for their large, complex clients.

To do so, CPOs will need to understand their current/future options and then determine the best fit strategy for them.

Previously, we identified a basic segmentation model for the procurement XaaS market that starts with demand segmentation and the “CPO as service provider” (and strategic value partner and ecosystem builder … there should be no conflict with this). The basic approach is to segment out your processes/services by process scope (e.g., upstream source-to-contract vs. downstream procure-to-pay) and by spend category (e.g., indirect vs. direct) to create your “market basket for procurement services” (individually and collectively) and then consider your supply-side service provider options. The more granular that you break this up, the more flexibility you have with best-of-breed options, but also the greater number of integration points and points of failure. This is only getting made more complicated with agile development processes that are quick to roll out new bite-size apps that might bite you back if you’re not planning for a cohesive architecture (e.g., composite data models and master data harmonization and synchronization).

To help take the services landscape basket out to the market (which is full of different vendors, we created a basic segmentation framework on two dimensions that generally encapsulates the market:

  • Transform (consulting) vs. Operate/Enable (BPO&MSP)
  • Strategy&Operations vs. Digital (which is both “I” and “T” in IT)

For No. 1 above, you may strategically partner with a large BPO that becomes a large virtual extension of your own organization and that helps craft an ecosystem for/with you built on next-generation digital platforms for intelligent automation and analytics (and integrating it to a fragmented flotilla of ERP and S2P applications that your business has built up over over the years) — even if you have a somewhat reduced menu of choices that your provider supports well. You are driving the strategy and services, and you are excellent at managing a large complex services relationship with this partner that has become your “easy button.” On the flipside, your own IT organization may be excellent, but you need third-party transformation services not wedded to any ecosystem, and you want the best thinking, best business models and best emerging practices — and you’ll figure out how to stitch it all together.

For No. 2 above, you may want to engage a single trusted advisor that knows your organization and can help you both create the strategy and roll up some sleeves to help you implement it, all the way through implementation of standardized S2P application suites. Conversely, you may want the absolute best objective thinking on strategy without any preconceived notions or subtle bias toward implementing technology strategies and solutions (and associated tech-vendor practices).

Once you’ve identified your general strategy, then you can home in on the best-fit service providers to engage to start building out your new ecosystem. To help in this effort, we organized our analysis on these dimensions so that we can try to best help match procurement service supply in the ecosystem to procurement service demand by procurement organizations. Also, since we serve the entire procurement provider ecosystem, we are developing this intelligence to help the supply side of the equation to help providers identify partners that they can engage operationally or “strategically” to help make sure that their part of the ecosystem is appropriately broad and/or deep.

Given this context, here’s what we did and what we learned …

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