Without question the procurement BPO space is heating up--at least as you listen to providers talking about it and going after it. I've personally not seen an uptick in the percentage of deals resulting in signed agreements, but it does feel like the market may be turning from one of window shoppers to those who are serious about pulling the trigger. Earlier this week, I came across this announcement that EGS, a London-based Spend Management solutions provider, had also launched into this market by signing its first deal with NHS Brent, a UK public sector client. EGS marks yet another entrant into the Procurement BPO market that also delivers other types of procurement solutions and services (many BPO providers like IBM and Accenture have different consulting, services, and even software arms, in the case of IBM).

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I'm in the process of beginning to research procurement BPO and outsourcing more seriously. Later this year, we'll publish some of this research on Spend Matters and also under the Horses for Sources label. At this point, I've thought about the following topics that I find relevant to procurement and finance organizations considering outsourcing part or all of the source to pay process:

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There's been a lot of chatter in the market these past few weeks about acquisitions. Some larger players are clearly headed to Costco to look for warehouse bargains (smaller formats and Ma and Pop shops aren't worth the time for these larger players, it seems). As someone pointed out to me the other day, Ariba has clearly spent quite some time attempting to clean up its top line to show higher-quality SaaS revenues--perhaps to argue for a higher valuation in the SaaS multiple range--while quietly pushing increased CD upgrades in Q1 to show the installed base is still alive. Might Ariba be on the shopping list for these larger players? I'd be surprised if wasn't, but then again, it has been for some time. It's just a question of valuation.

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You might have missed this announcement last week that there is a new force of nature in the boring and stodgy industry analyst world. My good friend Phil Fersht--he's only "good" when he’s buying the first round, mind you--has decided to leave the provider world and go back to his roots as an analyst. While one of the rumors surrounding his departure from Cognizant circles back to a rejection of a single malt on an expense report submission, I'd recommend you don't believe the hype. Phil, the analyst, is for real, and my guess is that every day away from the advisory world was one where he felt he was not fully leveraging his skills set--and above all, what he enjoyed doing most.

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Over on Horses for Sources, entrepreneur-turned-stealth-researcher Phil Fersht* recently suggested that some big-name outsourcing firms might be tossing in the towel when it comes to selling and delivering higher value offerings that focus more on process and expertise, rather than "lift and shift" labor-driven arbitrage models (which still quietly form the bulk of offshoring deals). Rather than go out with a bang like a Mike Tyson biting off an opponent's ear, they're simply keeling over, asking potential hires capable of working with C-level executives to "sell low-cost IT/BPO services, as opposed to working with existing clients to up-sell more consultative, higher business-value offerings."

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Yesterday, ICG Commerce announced it had signed Pinnacle Foods Group, a consumer foods company, to a three-year procurement BPO agreement. The deal, widely rumored for some time in the market, is anything but a transactional type of lift-and-shift, low-cost, labor-centric BPO approach. According to the announcement, "ICG Commerce will support Pinnacle with spend management across a range of categories, the largest of which include advertising, logistics, capital equipment, and plant-related supplies and services." What I personally find most interesting about the deal is where Pinnacle stands in terms of overall procurement sophistication in the market. Spend Matters research suggests that, compared to consumer-foods companies with more advanced procurement organizations (Sara Lee, Unilever, ConAgra, and PepsiCo), Pinnacle is actually a laggard when it comes to adopting procurement and supply chain technologies, systems and processes.

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In the first post in this series, I provided some background details on Capgemini's recently announced acquisition of IBX. In recent years, I've covered IBX in a number of Spend Matters posts, including a two-part series in the fall of 2009. You can read Part 1 and Part 2 of this series by clicking these links. Clearly, a major rationale for Capgemini making this deal was the ability to bring to market a procurement BPO offering, one that builds upon the evolution of outsourcing models driven by labor cost into process-focused approaches that now encompass technology as well.

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In an earlier column on ICG Commerce, I took a particularly close look at the company's history and traction to date; in this second post of the series, I will more closely analyze ICG's core value proposition and how it supports this philosophy organizationally and technologically. ICG Commerce has set up its entire go-to-market message around what it terms "savings realization," an approach to procurement BPO that seeks to not only help companies identify savings, but to capture all possible opportunities for making numbers stick and improving organizational returns on the back end. Interestingly, what's become central to this operating philosophy is what ICG describes as a "market intelligence" core. For ICG Commerce, market intelligence is all about helping companies better identify not only the best savings opportunities and how they stack up against the market, but also how to adjust to constantly changing market conditions in order to take advantage of opportune moments for additional savings identification and capture.

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Earlier in December, while on a whirlwind tour of the East Coast, I spent an all-too-brief 90 minutes visiting ICG Commerce, a provider I've spoken with on a number of occasions. In fact, my original relationship with ICG goes back to my relatively early years at FreeMarkets. At that time, I was part of a corporate development team tasked with transactional and partnership activity; ICG Commerce was on our list (or, rather, we were on their investors' list: Their investors wanted to merge our organizations, an idea we quickly shut down).

ICG Commerce had just received $100 million in investment from the Internet Capital Group (ICG) to create an outsourced, transactional model focused, in part, on leveraged buying on behalf of clients. Even in those relatively early years, the solution included a combination of software and services, yet it was not procurement BPO or procurement outsourcing as we've come to think if it. The evolution of the ICG business model would come relatively quickly; as the young organization experienced the limitations of a model solely focused on inter-company aggregation, ICG Commerce would quickly come to refocus its core offerings, even picking up Accenture's outsourced procurement requirements. In less than ten years the organization would grow from there into a top three provider (or top five, depending on how you calculate procurement BPO providers based on revenues), but more on this point in the New Year. Yet there's far more to the story than that, given how ICG Commerce differentiates itself relative to other providers, including both offshore specialists like Infosys and global competitors such as IBM and Accenture.

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It appears SAP is taking a move from Oracle's playbook when it comes to becoming more transparent with its On-Demand pricing and discounting: at the Influencer Summit last week, SAP shared a number of pricing details around its On-Demand products. As an example, consider SAP's approach to pricing its On-Demand E-Sourcing offering (not including contract management or supplier management, mind you). For its "standard offering," SAP pricing starts at 300 euros per month for primary users ("sourcing-event owners" in SAP-speak); other users are free. Sourcing-event owners have, in SAP's words, "full access to the features listed in the functional package [including the ability to] create, edit, and delete sourcing event information." Pricing for the standard offering drops to as little as 30 euros per month per seat for each sourcing-event owner above 250 users.

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