Procurement outsourcing is finally gaining ground as the next real dollar savings capture for organizations across all industry verticals. In my role as an advisor, I have seen a sharp increase in new outsourcing contracts as well as renewals recently.
Procurement outsourcing has always had the value proposition of deep category and sourcing execution expertise, combined with efficient operations, strong controls and robust analytics to free up resources that can be redirected to more strategic purposes. Given the rapidly maturing capabilities and global expertise of procurement service providers (PSPs) today, there is little question that outsourced procurement now delivers superior levels of savings when compared with internal-only solutions.
So why has adoption of procurement outsourcing taken this long? Primarily because it is different than other forms of outsourcing and, until recently, not quite well understood by many procurement executives and therefore has fewer natural executive sponsors. Second, a few organizations may have experimented with early procurement outsourcing projects that were either not structured correctly or resisted by procurement people with a natural fear that they might end up outsourcing themselves. Third, with little industry advice available, early adopters may not have managed their procurement service provider well enough to realize the full potential of the model.