When implementing a Services Procurement programme, is it better to start with an ambitious plan by outsourcing full-category management – or to keep the service scope simple, focusing the MSP on transactional activities?
Listening to the perspective of clients and prospects during the latest CWS summit confirmed my (knowledge-based) intuitions about this subject. Here are some insights I’d like to share with you.
Firstly, the level of ambition ultimately depends on the client. While it is possible to outsource full-category management, most companies are hesitant about an MSP’s capability to manage true Services Procurement. Businesses know that full-category management from the start is harder to implement and can create problems with the adoption rates.
At Pontoon, we believe it’s about the journey. The successful outsourcing of a Services Procurement programme has to be built on trust and proven competence. This starts with delivering transactional activities for the client – including onboarding, offboarding, payment management, time sheeting, and contract admin. Of course, it is critical to ensure that the scope of our client’s procurement programme is agreed upon prior to contracting during our solutioning phase to avoid unforeseen challenges. Getting clarity over the scope of our services is one of the keys to delivering a successful implementation.
With an initial focus on delivering value via those transactional activities, we can start to think about evolving the programme to its potential. A modular programme structure allows us to choose specific elements and build on them, adding value as we move forward for our customers – when they are ready to do so.
Every step of this journey is taken in alignment and communication with the client and their internal category management team. After all, the category manager retains the awareness of the organisation’s internal strategy and can adequately manage the connection with the Services Procurement provider, continuing to deliver value and success.
As we have already established, there are strong arguments for launching your Services Procurement programme at a more transactional level. Still, if evolution is an initial expectation within our relationship, then the programme team will ensure that this is marked on the development roadmap. Understanding the customer’s goals determines the path and destination.
Of course, an MSP can use its contingent expertise, leaning on its VMS technology to support a procurement programme, but that’s not always enough. As Services Procurement programmes evolve, they will require procurement expertise to help guide the buy, facilitate vendor selection, and negotiate costs.
If those expectations are not clear right from the start, you’ll be stuck with an extension of your MSP contingent service – and that may not add the next level of value you’re looking for in your Services Procurement programme.
By setting clear expectations, you’ll get a scalable programme that begins with minimal disruption and grows as your business needs evolve. With the right work transferred to the right resources, our clients’ teams can focus on strategic value creation.
We also negotiate, forecast, and control rates to achieve targeted cost savings. However, interestingly enough, the clients and prospects I talked to during the CWS summit acknowledged risk mitigation and best-practise operational process as the most important value adds of a Services Procurement MSP Programme rather than the much-touted theme of cost savings.
Another subject of interest at the CWS Summit was the case for and against a supplier-funded model. Convention dictates that a supplier-funded programme is cost-neutral for a client. Many will be led by this ideal when costing an MSP programme, contingent-based or Services Procurement. This may be a false economy and reduce the level of adoption from vendors who will need to participate in the programme but will be reluctant to fund it.
A supplier-funded model might look more appealing from the client’s perspective because it seems cheaper. But many in the industry consider this a myth because even in a client-funded model, you can deliver cost savings. With a supplier-funded model, the supplier pays the MSP fee, but the reality is that suppliers will compensate for this by increasing their own cost of delivery – so the customer is charged an inflated fee for the services. This was a commonly held perception at the summit, coming both from roundtable participants and panel presenters.
However, this is not to say that one model is better than the other. It is healthy to keep an open mind and acknowledge the pros and cons of each approach. Still, clients should be well informed to make a strategic decision that suits their needs and expectations.
Services Procurement outsourcing should be managed as an evolutionary journey based on client readiness, value drivers, and maturity level, all delivered via strategic change management. It takes time – just like building trust takes time.