27 March 2008
Procurement outsourcers will win the battle to attract top talent in purchasing, because they can offer the best wages and opportunities.
Mark Craddock, engagement director at research organisation Everest Group, told delegates at a National Outsourcing Association seminar this month that a combination of better pay, a higher profile and the need to hire experienced staff mean outsourcing firms would attract the best buyers.
"Procurement outsourcing providers can afford to spend a lot on managers because they are managing across a portfolio," Craddock said.
He added that the perceived lack of profile of indirect spend in companies would push buyers to outsourcing firms: "If you are good at indirects, the probability is you will move into directs. Buyers will ask themselves, 'Do I want to work for an outsourcer, or for a firm, stuck in the corner?'"
According to the latest research from Everest, although the value of spend managed by outsourcers is now more than $52 billion (£25.7 billion), 2007 was slower than the previous year in terms of the number of deals signed. This was attributed to the large number of big deals signed in 2006. As providers win contracts, it takes time to implement them, because procurement outsourcing is based on using experienced staff.
"When a supplier wins a deal it can take a long time to recruit someone with 10 years' experience. It's not like finance and accounting, where you can have a team set up in Bangalore in three months," Craddock said.
Most providers are charging between 1 and 1.5 per cent of the savings made, but this is dependent on the savings suppliers are expected to make. "The higher guarantee, the higher the fee," Craddock added.
He predicted Indian providers, such as Genpact, Infosys and Wipro, would grow in 2008. Indian suppliers are investing heavily in capability to provide basic purchase-to-pay (P2P) services. "P2P is becoming a real force. It is a surprise because it is at the bottom end of value," he said.