Offshore outsourcing: is it the right solution for you?

Nick Ford is customer service and delivery director for EMEA at Xchanging18 July 2014 | Nick Ford

The vision of how procurement organisations are evolving mirrors the recent trend across the whole business process outsourcing marketplace.

The availability of cloud-based procurement processing and IT services is driving this evolution with SaaS (software as a service) and BPaaS (business processing as a service) indicating the future direction.

Our view is that market reform will change the role of procurement companies within this space. This means that a number of operating models will be available with which procurement agents will need to find the right fit for their organisation – ranging from mostly offshore to mostly onshore and the variants within.

With regards to BPaaS, a key part of the decision making on which model to adopt is mainly driven by maturity. It is highly unlikely that an immature procurement organisation will move to a full offshore service. This is because working with the internal stakeholders and delivering the procurement transformation programme generally needs a heavy touch interaction approach to gain buy-in.

Similarly we see very mature organisations transferring many of their tactical and operation procurement activities to a lower cost delivery centre with all of the corresponding governance, policy and workflows already embedded, accepted and adhered to across the business.

In terms of SaaS, the story is totally different. There are now a number of transactional based world-class procurement and sourcing technologies which can be adopted in early and immature organisations on a transactional/as used basis. This provides even immature and small teams with e-sourcing, auctioning, e-RFx tools at their immediate disposal on a cost-effective basis with minimal upfront investment. In some circumstances this can make the return on investment calculations be measured in days rather than months.

For advanced procurement organisations the development of SaaS-based procurement solutions means they can still get the benefit of using the more advanced, niche sourcing tools as an overlay to their already implemented procurement platform. We have seen this in advanced areas of supplier-relationship management, supplier risk and value management.

The key in deploying the above services and solutions on an offshore or nearshore operating model is ensuring the capabilities are driving extra value for your organisation and the new services fit culturally within the rest of the organisation. In our opinion the winners are combining a best of breed set of third-party services and technology with their own capabilities in a co-sourcing partnership to drive to world-class capability.

☛ Nick Ford is customer service and delivery director for EMEA at Xchanging

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