- The companies are founded by category experts.
- Their solutions typically target markets where supply exceeds demand and/or technology has eliminated quality concerns.
- They all deliver a more structured, accountable procurement process with many going so far as to guarantee reduced costs and improved quality.
Exploring On-Demand Purchased Service Solutions
The management of purchased services continues to lag relative to other categories of spend. And while the reasons are varied and debatable, virtually no one argues the availability of big savings opportunities. So what gives? No doubt, the decentralized nature of many purchased services confounds attempts to introduce more manageable processes. And we can’t overlook the “stiff arm” that procurement leaders often receive from stakeholders who treat certain categories of spend like organizational sacred cows. Especially in the higher preference categories of spend (e.g., marketing, legal or management consulting), the resistance to procurement-led structure can be formidable.
Generalist Tools Don’t Cut It
The generalist S2P tools have never proven to be a good fit for many categories of purchased services. It’s not to say that practitioners don’t routinely push the functional envelope of these systems, because they do. But struggling with experimental configurations of RFx software is not where the profession needs to be. On a practical level, when a purchased service doesn’t fit the workflows and templates used in everyday practice, things tend to not happen. Management typically follows a reactive plan, meaning there’s little activity until contract expirations are in play.
No Market Context
It’s not just a software configuration issue. The market insights required to drive effective category management are often absent, especially in the highest preferred areas of spend specifically mentioned above. But knowing that you don’t have the appropriate benchmarks (along with not necessarily knowing what you would do if you did) speaks to the need for packaged solutions. In fact, “category killer” solutions are emerging. They are typically delivered as-a-service, so they are IT-light. Not only are many of these solutions easy to adopt and integrate (little change management required), but they require little-to-no training to use.
On-Demand Category Management
Obviously, all purchased service categories are not created equal. Not surprisingly, however, the most successful, new, on-demand solutions share several characteristics:
And while the management of low preference services doesn’t carry the same level of interest (or emotional baggage), as more strategic categories, there is still much to be gained by considering on-demand solutions. In fact, successful category-specific approaches aren’t about shining a light on a problem. On the contrary, they shine a light on opportunities. Print solutions help marketing professionals get comfortable with the fact that supply-side print technologies have leveled supplier playing fields to a point where print can be bid competitively without quality concerns. And legal category solutions provide clients with an opportunity to finally sit down with outside counsel and have structured discussions based on relevant facts. This is a game changer. In both cases, the merits of a structured approach are indisputable.
In markets where supply exceeds demand, or where technology has leveled supply-side playing fields, or where performance benchmarks are now available, the latest on-demand category management options should be aggressively explored. They provide procurement leadership and the stakeholders who have historically blocked their efforts to deliver structure with a way to collaboratively improve quality and reduce costs. If nothing else, they provide both parties with an objective way to quantify supplier relationship premiums and effectively address them when they don’t make sense.