A fundamental challenge of indirect and services procurement is that we’re often asked to make sourcing decisions -- not to mention negotiating with and managing suppliers -- based on historic data that may or may not reflect future demands and requirements. Travel procurement is the spend poster child for this kind of challenge today. Might the evolution in travel procurement that we’re seeing today represent an even larger paradigm shift that will permanently reshape the function? Perhaps, especially if you believe some of the key tenets presented in a February Wall Street Journal article. According to the story, “Historically, business travelers have accounted for half the customer base of major carriers and an even bigger chunk of their revenue. But even as the airline industry reports that corporate travel has begun to bounce back, many U.S. companies are keeping a tight leash on travel expenses.” From a travel-sourcing perspective, it's more than just volume levers that may be changing permanently.

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Continuing our new “Travel Tuesday” column, this week we'll cover some of the travel Spend Management basics. Today, I’ll refer Spend Matters’ readers to a recent Purchasing Magazine study that provides a useful state of the market when it comes to the role of procurement in managing travel spend today. According to the study, while negotiating/contracting and supplier management activities factor heavily into the role of the typical procurement travel manager, Purchasing’s research suggests that the largest challenge is “getting employees to comply with travel policies and preferred suppliers.” A specific concern in overcoming this hurdle is "keeping prices with preferred suppliers competitive with prices travelers find via Internet sites.” Spend Matters' own research, however, suggests that compliance does not have to be as great a challenge as it has been.

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Spend Matters research suggests that organizations collectively spend over a trillion dollars per year on a range of services categories. From legal to marketing to print to outsourcing, organizational spending across a breadth of often complicated and hard-to-manage services categories typically is large -- significantly larger than most companies realize before analyzing it -- and decentralized. When companies first start to tackle complicated services categories, one of the major challenges they discover is that price is often just one component of many that factor into services spending decisions. In addition, few organizations have any visibility into actual or total cost (rather than cost based on a unit of measure) for services categories until they receive an invoice from a contracted supplier.

Indeed, no one said that managing complex -- and in some cases, not-so-complex -- services categories was easy. After all, this is one of the reasons why procurement organizations often are involved in managing the sourcing and supplier relationship lifecycle for such categories as marketing, legal, and print only after they've tackled numerous other categories first. But the cost and non-cost rewards for tackling non-contingent services categories are often significant. The latest Spend Matters Compass series research brief (the second in our initial four-part series examining services procurement), examines the costs and opportunity of pursuing service. It's titled Services Spend: Beyond Contingent Labor -- Achieving and Implementing Savings Across Previously Unmanaged Categories.

This Compass Series paper provides strategies and approaches for pursuing non-contingent services categories, including recommendations for what to look for in technology and services partners. It also provides nine recommendations to procurement and finance organizations interested in getting a better cost and value handle on services spending. These include the importance of:

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Over the weekend, my wife shared with me that one of her high-school friends was interviewing for a category/vendor-management position focused on professional services and IT spend. The job would report up to the CPO of the organization (rather than to IT, as such roles often have in the past, at least indirectly). I did a quick check of our market-segmentation database. It turns out that the company, a supplier in the automobile and truck manufacturing industry, is in the top 10% of organizations we track in this market from a procurement, supply chain, and IT-sophistication standpoint (in Geoffrey Moore terms, they're a classic "early adopter"). The fact that such an organization plans to invest in a senior category manager in this area should not be surprising, but far too few organizations assign senior supplier/vendor-management resources to these categories today.

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Capgemini's recently announced acquisition of IBX got me thinking this week about what it will take for procurement outsourcing to go mainstream. Fortunately, the timing of my analysis (not to mention the deal timing) could not have been better, as it coincided with a last-minute visit from an expert on the subject who happened to be in Chicago the day following the acquisition. I had the distinct pleasure of catching up this week over some firewater with my old friend and colleague, Phil Fersht, of Horses for Sources fame (or would that be offshore infamy?) Phil knows more about trends in the overall outsourcing market than just about anyone I know, and he's got some fairly strong -- even survey-informed -- views when it comes to procurement outsourcing specifically. In a recent post on his blog, Phil spilled the BPO beans on some survey data that sheds some insight on procurement outsourcing.

In his new study, Seeking the New Normal in Outsourcing Delivery, Phil managed to get 1,055 outsourcing executives across customers/service providers and advisors to share their views on outsourcing and their intentions for 2010. In this rant, I'll share some of what he found, and offer up my own perspective on the situation. In Part 2, next week, I'll offer a no-holds-barred prescription for curing what holds back procurement BPO today (and how providers are just as guilty as companies when it comes to getting the sourcing/purchasing/payables outsourcing equation right).

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It's been a long-time in the in the making, but I'm very excited to announce the formal launch of Spend Matters Compass today. The first series launch focuses entirely on contingent and services procurement technology (subsequent series will tackle different themes). The first series theme, The Services Spending Revolution: Gaining Visibility, Control and Saving, will span four different topics -- each releasing in February and March -- but the first brief, available today, is titled: Selecting Services Procurement Technology -- Options, Approaches, and Philosophy. The three remaining topics in the series are:

• Beyond Contingent Labor -- The Roll of Broader Services Categories in an Overall Services Spend Management Program
• The Managed Services Connection -- The Evolving Role of MSPs in the Contingent Spending Ecosystem
• Making Procurement a Services Spend Ally -- Tips and Tactics for Winning Over the Business

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Over the past twelve months, I've found an increasing number of companies -- both vendors and practitioners -- who wanted a more "analyst-like" way to commercially interact with Spend Matters, but were either not interested in sponsorship or advisory engagements, or, if they had the interest, lacked the budget for a consulting-type engagement. As a result (and as part of our desire to further productize what we do), Spend Matters recently created a new On Call offering designed to provide phone-based inquiry time. On Call also provides a discount on a range of other offerings, including on-site advisory time, webinars, and demand-creation programs; vendors also receive the ability to license -- for free -- up to two pieces of Spend Matters content per 12-month period. We designed the offering to be extremely straightforward and affordable, and to complement other, similar offerings in the analyst market. Based on our current staffing levels, we plan to initially limit the number of On Call members to a dozen organizations (we are in the process of signing our first On Call member this week). However, if demand reaches a higher level, we will bring on additional expert resources as required to meet demand.

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I've been doing a significant amount of research of late in preparation for an upcoming deep-dive series on the services procurement market (more on this tomorrow). My research had me speaking with dozens of practitioners, VMS (vendor management system) providers, and MSPs (managed services providers) about what they see as working (and not working) with the programs they're either managing or engaging in currently. On the practitioner side, I've had the chance to talk to both procurement and HR-types who are running contingent programs for their companies (this itself presents a great subject for further exploration some other time). What I've learned from both customers of contingent workforce programs as well as the providers that serve them are two quick tips that will almost universally hold true regardless of industry, organization, or geography.

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Many companies that are using spend management technology typically have a sourcing solution in place first before they consider implementing a supplier performance management (SPM) solution. There are various reasons for this. Companies often pursue sourcing as a first step to obtain the good return on investment that it provides. Sourcing solutions are a fairly straightforward sell to senior management, as compared to SPM, and since the resources in many purchasing organizations are focused on sourcing, the fit appears to be a logical one. In the case of supplier performance management, the business case seems less clear than for sourcing. With sourcing, you can estimate how much less you might spend on sourcing goods and services with a solution in place; in SPM the return on investment depends entirely on how well you implement the process. (This ROI challenge is also true for sourcing, but is less obvious.) Many companies seem to find SPM more difficult, a subject that I once wrote about for Spend Matters. A lot of companies use the low-hanging fruit argument, as in, "Let's get the ROI for sourcing first, and then move on to SPM."

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Earlier in January, I offered up twelve predictions for 2010 and said that I'd tackle them in more detail in the coming weeks. The first on my list is one that I've been thinking about extensively over the last few months, and gathering facts to support. And that's the notion that demand for sourcing and supply chain consulting services will rebound materially in 2010 (as will the payment of invoices for work invoiced in Q409, much of which I know is lagging at some firms). Before getting into the nuances of this prediction -- as well as the specifics about what types of services are most likely to benefit -- it's worth taking a step back and talking about the services climate earlier in 2009, a time when many companies "tossed the bums out." This was not because they were unhappy with the results and savings they were getting from services providers, but because forecasted volumes (not to mention current inventories, in certain cases) had fallen off a cliff, and fewer companies could justify having large consulting teams onsite to drive savings efforts.

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