While there are many trends and corresponding predictions that generate headlines and steal thunder, there are several other trajectories that may not be front-page news, but nonetheless, are deserving of business leadership attention as we move further into January and, of course, into 2024.

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According to Ardent Partners and the Future of Work Exchange, 70% of business leaders believe that natural inertia is the number one reason for avoiding transformation of people-based services procurement. But businesses have the chance to unlock such greater value when they create scalable, repeatable, data-driven, outcomes-based programs.

The Exchange teamed up with Randstad Sourceright to develop and produce a new research study outlining why businesses must “reimagine” services procurement and SOW management in the evolving world of work. The new report unveils a robust, four-layer framework to help guide organizations, as well as detail how to push through the major challenges in strategizing and centralizing (and automating!) the core facets of services procurement.

Click here or on the image below to download the new study.

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No one volunteers to wear a straightjacket unless they are a magician.

It is now almost 25 years since I had my defining services procurement experience.

I was working for a global corporation, and, after spending 11 years in different buying roles, I switched to product management and took responsibility for a portfolio that generated about $200M revenue per year. While in this role, I was asked to spearhead a comprehensive change agenda that included reflecting on the external service providers we contracted at the time.

To achieve this objective, I worked closely with the procurement professionals who supported my new division. I had not worked with this team before but I was confident that we could easily collaborate.

I was so wrong.

During our first meeting, I asked for their opinions and ideas on how to best assess the performance of the incumbent suppliers. “We can do anything you want, Paul, as long as it is already written in the service schedules,” I was told.

But the service schedules didn’t seem to be as well defined as they could have been. I looked at this as an opportunity to get creative with the benchmarks.

“Of course, Paul, as long as we don’t ask the suppliers to do something new. We can’t risk them raising the price,” they suggested.

“We should also start to proactively look for alternative sources of supply,” I said.

“No, we can’t do that yet,” they replied.

“Why ever not?”

The procurement team explained that the contracts were not near enough to term and they didn’t want to waste time qualifying any new suppliers until they started the retendering process.

“But I want to explore what is available in the market,” I said, “and I am sure you have other suppliers you can recommend?”

“Well, not really, Paul,” they said. “We are so busy that we can’t monitor the supply market ourselves, so we typically ask stakeholders like yourself to nominate any additional suppliers for the tender.”

I took this as great news and thought it meant I could identify some new suppliers that we could hold exploratory meetings with.

“No. As we just told you, we can’t do that until we start the retendering process.”

This left me frustrated. I felt like the team wasn’t hearing my needs. I was the product owner and I wanted to begin this work. I also wanted to start meeting with the current suppliers to better understand our return on investment from working with them.

“You mean you want to challenge their pricing?” they said.

“No, not necessarily — I just want to know what we’re getting for our money.”

“Well, we would need to have that discussion with them. You are not empowered to talk commercial terms with suppliers, only the procurement team is.”

“But, I am the budget holder. I have a business need for their services. I am accountable for what they deliver. Why can’t I speak with them?”

“Sorry, Paul, you can speak to them about operational matters but when it comes to any commercial topics, you need to leave that to us.”

“I told you already I don’t necessarily want a price reduction, I just want to understand what value they are giving me.”

“Well, we need to be careful about that. You see, if you start asking them to increase their value then they might want more money. So we can avoid that if we control the conversation.”

And so, there you have it. Twenty-five years ago I first encountered that word “control” in a procurement/stakeholder context, and I have been allergic to it ever since.

Despite me being in charge of a product portfolio that brought in $200M a year, despite being accountable for decisions that affected hundreds of operations personnel, and despite being the budget holder of millions, apparently I couldn’t be trusted to speak to a supplier. Through the eyes of that procurement team, I was a maverick because I wanted to go outside of their process to instigate sensible and necessary business actions. I can still vividly remember the exasperation I felt at how little the team seemed to care about what was important to me. There was no collaboration.

In the 25 years since, in my various roles, I’ve seen many services procurement experiences play out similarly. And this naivety has infected managed services providers (MSPs), too.

Don’t set yourself up for failure.

How many procurement professionals are still viewing an SOW management solution as a way to stop their business stakeholders from doing something? How many MSPs focus their solutions on controlling or reining in perceived maverick or rogue behavior?  If you have spent any time walking in a stakeholder’s shoes, you will agree that this mentality often leads to failure.

Ardent Partners’ and the Future of Work Exchange’s annual buy-side research, similar to many other contingent workforce research initiatives, consistently cites stakeholder resistance as the number one reason why services procurement solutions fail. And the number one reason stakeholders resist a services procurement solution is because, in reality, way too many of these programs have the characteristics of a straitjacket. So, who can blame them?

How to drive stronger collaboration.

In 2007, I returned to procurement, first as a global category leader and then a consultant. My experiences as a stakeholder had a transformative effect on the contribution I was able to offer to my internal and external clients. Here are the three key things I always tried to keep front-of-mind to improve outcomes:

1. Be oven-ready for new stakeholders. When primary stakeholders and budget holders rotate, as they very often do, there is a window of opportunity when the procurement team can be significantly valuable during their acclimatization period. What are the current supply arrangements? What are the issues of the day? How could the new stakeholder be a catalyst for increasing supplier value? Maintain a storyboard that can be ready at a moment’s notice. Being oven-ready like this also ensures the procurement lens is outwardly- and future-focused.
2. Always seek to improve the procurement process. It is critically important that you are regarded as a champion for effective and not outdated buying practices. Stakeholders will want speed and simplicity. Suppliers will want to minimize their cost of sale. True business partnering happens when all parties are invested in each other’s success, so the more you demonstrate a collaborative center of gravity, the more you can expect your stakeholders and suppliers to positively reciprocate.
3. Don’t expect anyone to volunteer to wear a straightjacket. The word control means to “to exercise restraining or directing influence over someone or something.” Through the lens of a services procurement solution, this means that reluctant participation is all you will be able to realistically expect. Better outcomes will result with stronger collaboration, rather than control.

The only way a services procurement solution can be sustainably successful is if it is insight-led and purposefully designed to enable the stakeholders’ objectives, not to control what they can and can’t do.

Connect with Paul on LinkedIn, or visit Randstad Sourceright for more information on their solutions and offerings.

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The origins of modern commerce can be traced back to the eighth century in India, where early organizations, called shreni, first started to emerge. Shrenis were associations of crafts persons and merchants and the people who worked for them performed various functions. They provided services such as training, the purchasing of raw materials and the distribution of finished products.

In all the time that has followed since, the world of business has undergone tremendous amounts of change. But the one constant is that few, if any, commercial organizations are ever likely to be totally self-sufficient. They will always need to spend a proportion of their operating costs on some form of external services support.

With more than 1,200 years of practice under our belt, you would think that we’d have the procurement of external services down to a fine art. Requirements would always be well-considered and clearly articulated. Service providers would know exactly what they have to do and how their customers will be judging their performance. Price negotiations would always be fair and equitable. And all parties would be working seamlessly together to create bi-directional best value.

Unsurprisingly, this is not the reality of the business world we live in.

Buying services involves people, and people have different perceptions of value. People have different tolerances of quality. They have differing levels of budget, knowledge, patience, urgency, and ambition.

Every day we talk to organizations who would like to buy services better, who know they should be buying them better. Some are not sure what they need to do and how to do it. Some know what to do but they never quite get around to doing it. Some are ready and willing, but they are waiting for someone else to make the decision for them before getting on with it.

And this is precisely why services procurement should matter to your CEO. 

Firstly, because a CEO is ultimately responsible for maximizing shareholder value. And if they are to do that, then they need to be aware of what might be diluting it too.  It is highly likely that the assumed ROI of procured services is being negatively offset by the inefficiencies and procrastination embedded in your organization’s buying processes.  For example, according to the World Commerce and Contracting association (formerly IACCM), the most frequent source of claims, disputes and disrupted relationships is due to poorly drafted contracts, most notably around the scope and objectives of the work.

Here are five insights that your CEO should have ready access to:

1. How much is your company spending on external services in their entirety?
2. How much is your company spending on different types of services?
3. How has your company’s spend profile changed over time and what is driving that change?
4. Who are your company’s key suppliers and how strong are your relationships with them?
5. How do your company’s buying processes compare to recognized best practices?

If these insights are not readily available to your CEO, then it is implausible to claim that shareholder value is being maximized.

The second reason why services procurement should matter to your CEO is because they are the guardians of your organization’s reputation. There are increasing legal and compliance risks associated with the engagement of external service providers, such as disguised employment off-payroll, and so it is crucial that executive leadership are not only wise to these risks but that they implement appropriate and workable mitigation strategies, too.

The third and final reason is because CEOs need to ensure their organizations are continually scanning the market for competitive advantage. Organizations that purposefully adopt a win-win approach to their engagement of external service providers are much more likely to become a customer of choice. Customers of choice are much more likely to be given access to the most current, innovative, and progressive thinking from their service providers because the relationship is mutually beneficial.

Clearly a CEO should not be spending their time down in the weeds of spend analytics, contract negotiations, and supplier relationship management. However, at the macro level, if they can’t be certain your organizational approach to buying services is fit for purpose, it could have serious repercussions for the long-term health of your business.

Connect with Paul on LinkedIn, or visit Randstad Sourceright for more information on their solutions and offerings.

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