THE BUSINESS REVIEW FOR PROCUREMENT LEADERS
After a cool start, the market for indirect procurement outsourcing, or BPO, is hotting up. The past six months has seen big firms such as Unilever and Colgate-Palmolive join the likes of Lucent, BAE Systems and Deutsche Bank in outsourcing some of their spend categories, purchase-to-pay processes or a mixture of both.
Despite these contract wins and analyst predictions of provider earnings growth of up to 30 per cent over the next few years, though, procurement outsourcing is still in its early adopter phase; the all-important “tipping point” has just not happened yet. Concerns about service providers’ ability to deliver savings and service improvements are among a number of factors that make many CPOs sceptical about the validity of the BPO model.
However, there is general consensus about the need for CPOs to be proactive and well informed in this area, whether they intend to initiate discussions internally or not. Advice from providers and early adopters includes: be clear about your objectives; ensure that you have internal support for change; understand the different business and pricing models; choose a provider that fits your culture; and work hard at nurturing the relationship.
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