Services procurement is not a silo, but part of the bigger picture for managing wider enterprise spend complexities
The trend of “best of breed” sourcing, contract management and p2p solutions converging to suites, as well as the overall predicted growth of the services economy suggests it only makes sense that services procurement automation will be able to achieve new levels of savings and process efficiency by adopting a wider “source-to-pay” platform approach.
As we’ve addressed in recent blogs, it is clear that procuring services (i.e., people’s time/talent) is not the same as commodities and nor will it ever be — you can’t put people in a box. The need to manage complex features, such as time and talent, that get matched with the award, requires a lot of collaboration, and often third parties involvement.
To meet this need over the past decade, specific technologies have evolved in the eProcurement world to address the needs of managing spend related to a non-employment workforce, such as contingent labor. This evolution was primarily due to the differences in sourcing/purchasing services v. product and the overall inability of traditional eProcurement systems to go beyond managing traditional PO-based processes for receipt of goods and managing services — consider complexities like: complex resource selection process, resource vetting and performance monitoring.
The “niche” market often called Services Procurement is linked, but not directly associated, with wider S2P vendors like Determine. Since these providers are almost exclusively focused on managing the acquisition of talent for specific projects, these technologies are often an additional investment as part of their wider source to pay efforts. But the ability to digitize the process of managing services in terms of adoption has not been nearly as successful as that of managing products with eProcurement technologies.
Part of this is due to the focus of what these solution are designed to do. As Andrew Bartels of Forrester makes clear in his latest report on the subject of services procurement, temp worker are a small part of the purchasing services. For instance, based on the US Census Bureau Services Survey (2015), temporary workers was $119M compared to $2,455M related to professional business services. With spend in services increasing, this has translated into a huge opportunity for organizations to improve the way they capture the bigger fish of professional services spend (i.e. SOW/MSA based spend).
Even as specialized Services Procurement providers evolve and look to expand in areas like freelance talent or SOW based work, the simple fact is that “specialization” in services spend entails that they are not handling spend in a “common system” with other areas related to enterprise wide supplier management or contract management efforts. Moreover, managing data in product v. services spend silos isolates the real truth of total spend across the wider company, that may negate the value of looking to achieve spend and process under management goals.
Organizations that average a high number of services particularly in industries that average more than 80% of their spend in services alone (e.g. Financial Services, Insurance, HealthCare, Professional Services, Media/Entertainment) require the ability to not only manage the services spend, but also effectively manage that spend against complex budgets.
Whether CAPEX or OPEX, or project based, the alignment of spend and spend initiatives may need to mix with product categories of spend against a wider a budget, and thus require the ability to interrelate different spend categories under one “umbrella solution”, for effectively managing enterprise spend.
For instance, using budgeting capability for an OPEX budget, a true S2P system will clearly display real-time sourcing and purchase information on all spend related to one department, business unit or spend type. With a CAPEX budget, the system could address a broader range of spend activity, but can still automatically allocate the budget line items to the right GL codes regardless of whether it’s a service or product.
Further still, a project-based budget is greatly dependent upon capturing and monitoring all spend that occurs during a given time period; advanced S2P solutions like Determine will ensure that the company is able to manage processes (onboarding, time sheets, milestones, performance tracking, etc.) and capture all reimbursable spend while providing the transparency necessary to allocate and control the project’s funds efficiently regardless of spend type. In all, the displays and methods for capturing and allocating spend may change depending on the budget, but the end result of actionable insights remains the same whether you are managing services or products.
If you are interested in learning more about the topic of services procurement and how it is evolving, I would encourage you to join guest speaker Andrew Bartels VP and Principal Analyst at Forrester Research and Julien Nadaud, Chief Product Officer at Determine for an engaging discussion to learn more about this important area. We’ll explore these dynamic services spend challenges, and discuss how you can better understand and manage them within your organization.
Click here to register https://www.determine.com/lp/2158-wbn-forrester-services-procurement.