Discuss, debate and exchange ideas on latest trends and opportunities in the Business Process Management (BPM) landscape. Deliberate on adding “business value” to clients, vendors, employees and various other stakeholders to enhance customer satisfaction and sustain long term partnerships.

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January 30, 2019

Procurement As-a-Service- How Is 'As-a-service' Changing the Outsourcing Models for Procurement?

SAAS i.e. 'software as a service' has revolutionized the IT industry in the last few years giving rise to multiple similar concepts in other service areas as well. With Agility, Flexibility, Speed to market and cost containment focus- including shrinking IT budgets being key business goals and the emergence of cloud based technologies permeating all aspects of business and life - the ball game has become much bigger!  

XAAS or 'Anything as a service' includes a broad spectrum of services being delivered through remote access and cloud. 'As a Service' offers a more flexible- plug and play based model for obtaining services. Top analysts firm HfS uses the term "Service as an economy" to emphasize that the emergence of the next phase of outsourcing- which is more flexible, on demand and outcome-focused way of engaging and managing resources and technology to deliver services. 

'As a Service' and Procurement
I have been witnessing these changes in my area of work as well, while a few years ago, the client executives were hesitant to outsource procurement services beyond the traditional scope of Procure to Pay, today there seems to be a much larger community of procurement and business executives willing to partner with Service Providers and relying on their expertise and specialized knowledge to drive transformation and benefits at an accelerated pace. 

Growing pressures on Procurement, higher stakeholder expectations, and increased demand for analytics and market intelligence are some of the other factors that have made the businesses to take notice of the procurement service provider capabilities available in the market today and are willing to go beyond and more than the vintage ways of resource augmentation and business process outsourcing.
Companies are also looking at significantly different ways to access procurement expertise of Procurement Service Providers and looking at flexible, modular services and commercial models from them enabling growth and greater value generation.

Evolution of 'Procurement as a Service'


In Procurement as a service landscape, the service provider manages the interconnected elements -  i.e. service, people, technology and architecture unified 'as a service'.  Thus the key elements of the 'Procurement as a Service' would be:

Service Layer: 'The heart'; comprising of Business processes designed with best in class standards, operating models, people element and Service Portfolio/ modules backed by automation and domain expertise.
Technology layer: 'The spine or the base' and includes the cloud and network of supporting applications, ERP platforms, and Infrastructure. 
Intelligence & Analytics: 'The nerves' - Analytics and intelligence form a vital aspect inbuilt into the model- that enables proactive processing of data at multiple levels using advanced analytics to identify opportunities, trends and improvement areas. 
Compliance & Risk management: 'The compliance and risk management aspects are inbuilt into the PRAAS framework including both service & technology aspects. 

All that Glitters is definitely Gold
The value from such an arrangement is vast and offers immense potential, for one it provides the much needed agility for companies to rapidly adapt to business changes and scale up in event of a new market opening up for business without having to worry about setting up a procurement machinery and hassles and cost involved in technology implementations. From a cost perspective, the companies only pay for services they use with having to sign up for a bundle of services. The model additionally drives down the costs of investing in / updating technology systems and managing switch over from legacy systems every few years which itself provides significant operational savings.
The model also enables companies especially small and mid- sized companies to have access to a wider stack of services, new products and expertise on demand opening up even smaller organizations to the benefits of strategic sourcing, analytics & category insights.Further, the services are based on consumption and commercial model based on usage and committed outcomes/ value delivery

The first steps - Where are we headed?
Many top service providers offering procurement services have already stepped up their efforts to fully incorporate and offer 'As a Service' delivery models to offer larger value to their client. They are investing in people, technology, analytics and automation capabilities leveraging design thinking, the latest digital innovations and partnerships with clients to offer models like consortium/ aggregated buying etc.  A number of service providers have already started offering modular solutions in some of the areas such as consulting, category management etc.  However, in my view, it will still take some time for the models to mature to be able to fully realize its true potential

While there is excitement, there is also a lack of clarity on what to expect when it comes to taking the first baby steps towards 'as a service' transformation. As in case of the digital bandwagon, here too having clarity on vision and future direction of your business is primal - so is the need for gearing up to adapt to the change. Hence a dedicated change management focus across the organizational hierarchy, focus on improving current processes and nurturing right talent are some of the prerequisites to ensure success.

The stage looks all set - 'Procurement as a service' promises a bigger and brighter future for procurement, given its tremendous possibilities. It will not be an exaggeration to say that in the future the current models of procurement outsourcing may altogether cease to and be replaced by a completely modular cloud based operating service landscape bringing delivery, technology and talent integrated seamlessly and delivered on demand.  

Authored By

Riya Nehra 

Principal Consultant - Solution Design

January 28, 2019

Redefining Procurement Efficiency with Demand Aggregation

Value for money continues to be the focus of procurement teams. B2B brands have deployed various strategies and procurement efficiency levers to contain costs. Demand aggregation acts as key efficiency lever leading to higher buying power for the buying organization resulting in higher discounts and cost savings.

I reminiscence, how I used to go to different stores to buy grocery, household items and other essentials just a few years ago. As years passed, all these items were available in a supermarket where I could not only buy everything under one roof but also choose from a wide variety of brands, volume, and price. As a shopper, you could pick, add, pay and check out of the store in no time. This not only cut down the travel time to different stores but offered shoppers - volume-based discounts, a plethora of choices and improved the frequency of buying. 
Are we still buying in the same manner at present? Although we still have supermarkets, it is now a combination of supermarkets and virtual marketplaces like Amazon and Flipkart. The virtual marketplaces are taking over, which not only give us better pricing, the convenience of buying from home and offers a superior experience.

The point I am trying to make is, as the selling model evolved, the buyer is naturally drawn to considering the benefits the new model offers. Which in most cases is being cost-effective, convenient, time efficient and relevant. When we look back and analyze how the model has evolved over time, technology has played a vital role by catering to our changing lifestyle and demographics. Virtual marketplaces have cut down the divide between rural and urban buyers bring in improved accessibility. Technology has also been instrumental in improving the overall shopping experience irrespective of the channel. 

Similarly, on the B2B side too, the buying models have evolved. Value for money continues to be the focus of procurement teams. B2B brands have deployed various strategies and procurement efficiency levers to contain costs. Demand aggregation acts as key efficiency lever leading to higher buying power for the buying organization resulting in higher discounts and cost savings.

Aggregation is an established way of driving larger economies of scale. This not only results in reduced costs / or higher value from suppliers but also reduces costs of operations as a result of reduced buying or sourcing events. Another benefit that accrues is of standardization which leads to inherent efficiencies. Demand Aggregation could be simply at an organization level or even beyond the organization boundaries.

Aggregation of demand from multiple businesses who buy the same products or services, probably from the same supplier but have not been able to achieve the benefits of the volume pricing or centralized delivery even though they all probably need it in the same time period. Despite the advantages- businesses still grapple to aggregated business demand outside of their organization. Perhaps what's stopping them is the absence of a compliant layer or channel which can aggregate and fulfill the demand as per the policies and procedures of their Procurement organization such as Amazon or Walmart of the retail world. 

Many emerging startups over the last few years like Uber, Airbnb and OYO have focused on the creation of mobile/ tech-enabled customer facing marketplaces. This helps in aggregating customer demands efficiently. In the B2B scenario, too many businesses have deployed strategies to aggregate the demand and consolidate the supply base. This has resulted in many significant suppliers restructuring themselves as aggregators like Grainger in MRO space or managed service providers to meet the demand of their clients for a bouquet of service / product portfolios.

The Procurement service providers so far have been concentrating on improving the efficiency and compliance of the process through technology, outsourcing or automation and it has enabled us to change the game altogether and concentrate where the future value is going to come from. Alternative buying models leveraging collaborative buying is an emerging opportunity where the new age Procurement service providers can play a significant role.

Issues like taxation laws, logistics, IP legislation across and sometimes within borders can add multiple layers of complexity and often act as a deterrent to demand aggregation. However, as aspiring demand aggregators and collaborative partners have to invest time, effort and money to define and resolve the differences and establish a universally adaptable yet local model to sustain in the long run.

Authored By 

Kiran Huthanahalli Manjunath 

Domain Lead

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