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Trends in Services Procurement

 

As we started off 2020, the Services Procurement space was besieged with inadequate technology solutions. There was a lack of integrated, comprehensive, end-to-end solution which the various vendors were trying to stitch together. Technology solutions involving Vendor Management System (VMS) and Procurement solutions for Direct and Indirect spend were being merged or adopted to satisfy the unique requirements for Services Procurement.

COVID-19 as a disruptive force

With reference to geopolitical affairs, Fareed Zakaria, the host of CNN’s Fareed Zakaria GPS suggests on The Munk Debates that “a crisis like this (i.e. COVID-19) they tend to accelerate existing trends more than to completely upend them or transform them”. Taking a cue from his earlier statement that it pervades all kinds of different areas from health to economics, it is easy to see that so will be the case for Services Procurement. A Google search will show that several leading strategy and thought leaders also align to the view that COVID-19 is simply hastening the changes that were already in play before we got hit by the virus. Hastening of such activities, however, may still not be enough to alleviate the pain points as the challenges are quite complex.

Pain points in Procurement of Services

Managing Services Procurement is not similar to managing Indirect or Direct goods. Range of Services may span a wide spectrum from simple to complex with or without confirmation of services rendered in a background of preexisting contracts or need for a new contract. Hiring contingent labor has its own associated challenges of onboarding/offboarding, progress/quality tracking, invoicing against timesheet, Statement of Work (SOW), etc. Ownership of different aspects of different Services is unfortunately fragmented across the different groups in an organization.

What is one to do?

While concepts of category managers and center of excellence may be steps in right direction, the fundamental need is to develop a standardized and unified model of services procurement that covers all its aspects. Irrespective of where the requirement may originate from, there is a need for a unified flow and consistent flow through the enterprise. A service request can come from a casual, ad/hoc requisitioning or from planned activities (such as maintenance work, specific projects, etc.) or from job postings, etc. In all such cases, whether the tasks are being managed in the transaction processing ERP, in function specific applications such as Asset Management or Plant Maintenance or from Vendor Management Systems, they should be harnessing a common data model.

Peering through a looking glass

Covid-19 pandemic has already caused disruptions in the supply chain with soul searching as to how companies can improve their resilience, adaptability and flexibility via diversification of supply chain. Outsourcing to low cost options is a natural outcome of such an exercise. As the economy emerges out of the shadows of the pandemic, increased demand for Services will be a logical outcome. Trade in services as a % of GDP has been on an upward trend for the past decade reaching up to 13.3% in 2019 as per the World Bank. Positions that have to be filled up quickly will result in an increased demand for contingent workforce as gig economy constitutes increasing component in the GDP. At the same time, increased tolerance by employers for remote workers and demand for flexible work engagements by workers will establish new operating standards for the Services economy. Companies that are better prepared for managing their Services Spend will be better able to harness the opportunities of the post pandemic economy.

 

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