Xchanging targets tail spend to provide 'market differentiation'

Will Green is news editor of Supply Management
21 January 2015

Xchanging’s procurement division has had its most successful year ever by focusing on tail spend.

Chirag Shah, executive director of Xchanging Procurement, said the firm had combined its e-auction technology product MarketMaker4 (MM4), acquired in 2013, with pricing and supplier data to create a “massive uplift” in business.

“We have had out best year ever in the history of Xchanging Procurement in terms of sales activity and it is principally driven by our success in the tail spend arena,” he told SM.

“The challenge of tail end spend historically is you want to bring sourcing capability to very low spend where you start to challenge the value of the benefit you’re providing versus the cost of the benefit.

“We have both the technology capability to develop the tools that lend themselves to tail spend as well as the IP around suppliers and benchmark data that we can leverage to effectively make that process much more automated.”

The move into tail spend followed a tough year for Xchanging Procurement in 2013 when a key contract was renegotiated, resulting in a loss of profit. 

“It’s forcing us to revisit the service offerings we have and consider what is the best way we can add value and provide differentiation in the market,” said Shah.

“One of the outcomes of that has been a refocus on a relatively new area of service offering we’re calling tail end spend management.”

Xchanging has also started to offer “procurement-as-a-service” (PaaS) to clients, combining software technology with procurement support. 

“What we’re able to do with a PaaS offering is be able to provide the technology with services delivered locally on an on-demand basis,” said Shah.

Shah said MM4 revenues had grown 100 per cent over the past year as a result of PaaS and tail spend management.

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