On our blog and in the OutLoud podcast we’ve been talking quite a lot about the unique requirements of services procurement. In a podcast interview, Determine Chief Product Officer Julien Nadaud addressed the fact that in terms of specifications/requirements and the qualification process, buying services is fundamentally different from buying materials. Kelly Barner wrote a multi-part blog series about how services procurement cannot be considered “one thing” since it encompasses a broad range of talent areas, cost and delivery models, and operational effects on the business. At this point, I think we can agree that services procurement is a case unto itself: but what about procurement services — services that procurement purchases for their own use?
Procurement is increasingly becoming a direct consumer of professional services – and not just in the X-as-a-Service sense. We outsource tactical efforts, contract for the creation of intelligence and content, and hire category specialists when an opportunity to bring spend under management does not align with internal capabilities. The question we must be prepared to answer is whether the progress we have made with services procurement technology has prepared us to effectively select and manage the service providers that work for us directly.
In a two-part resource guide written by Spend Matters’ Chief Research Director Pierre Mitchell, we are presented with the backdrop and challenges of the procurement services market as well as “7 Habits of Highly Successful Consumers of Procurement Services.” The primary takeaway from these guides is that all services are reliant upon the tendencies and motivations of people, and therefore — whether the services are delivered by employees or third-party service providers — thoughtful management and oversight are required.
What are you buying?
This is usually the number one challenge cited when facing a services procurement project: that specifications and requirements – not to mention projected demand figures – are so different from materials. When procurement goes to market, the first step is to draw the line between what procurement will continue to do and what will be completed by a service provider. Procurement might contract with a service provider to execute the sourcing process in a specific non-strategic category of spend. If this is the case, procurement is “buying” capacity, which leads to the delivery of qualified supplier options to choose between. With strategic spend, procurement is “buying” the capability or expertise required to generate a knowledge-based deliverable such as long-term options for better managing both the demand and suppliers associated with a business need. The expectations, consumption patterns, and contracts governing procurement’s purchase of services for capacity or capability vary widely – and having managed one does not necessarily prepare procurement to manage the other.
What are you getting?
The expected outcome of procurement services agreements will vary just as much as the nature of the services themselves. Is the service required to address a tactical portion of procurement’s responsibilities or to manage something so strategic that a specialist is justifiable? Procurement may work with a service provider to generate results on their own behalf or to gain access to the provider’s experience and capabilities. Either way, the metrics used to determine the success of the service agreement need to closely mirror the expected outcome and procurement’s own performance measures. In this way procurement can ensure that the desired outcome is achieved because everyone is clear on the expectations.
Will you achieve your long-term objectives?
Procurement services (regardless of type) are sometimes brought in to address short-term needs. And yet, procurement knows well that all short-term goals must also tie closely to the long-term objectives of the enterprise. Additional frameworks and measures may need to be put in place to ensure success over time when there is the risk that consultants will be rotated on and off of an account, or incentivized to protect intellectual property. A lack of productivity or commitment on the part of the service provider cannot be allowed to prevent the outcome from being as effective as promised.
Procurement needs to keep in mind that when they are managing procurement service providers, they are not just acting as consumers; they must also serve as a good example to the rest of the enterprise. If procurement does not set clear expectations for service outcomes and effectively manage their own demand, they can hardly expect other functional areas to do so. There is no room for a “this is just for us” mentality with procurement services. Procurement should hold themselves – and the service providers they work with – to a fair but high standard. Download the guides.