As the indirect procurement outsourcing market posts double-digit gains, the top service providers listed here are the go-to vendors for the industry.

by Denise Doig

To date, procurement outsourcing has been the small fry in the value meal of FAO—not necessarily small in numbers but small in recognition. However, as more companies look for ways to cut costs, procurement outsourcing is becoming one of the best options.

Compared with FAO, procurement has a bigger financial impact on the bottom-line. According to analysis from the Everest Research Institute, managed procurement services as a percentage of sales has a financial impact of 0.5 to 2 percent, while overall FAO is estimated at 0.2 to 0.6 percent.

The most lucrative savings are in indirect procurement. Everything including the kitchen sink can be managed externally. These include office supplies and equipment; global travel; maintenance; repair and operations; HR benefits and services; marketing and advertising; printing services; facilities and property services; IT hardware and software; temporary labor; telecom and network; business and professional services; capital equipment; utilities and energy; and others.

Provider manage multiples phases of internal purchasing for different spend categories but mostly the procure-to-pay phase. According to Forrester Research, a procurement deal involves a long-term agreement, typically more than 18 months; vendor acceptance of accountability for outcomes; and the transfer of responsibility. There are different options in procurement outsourcing—a provider can source goods for the client, administrate electronic tools used by suppliers, or mange specific purchasing tasks.

In this first listing of the top procurement providers, we have included a description of services, descriptions of their deals won to date, and other pertinent information for all 10 vendors. We also have included a case study detailing the ongoing arrangements between a procurement provider and buyer. We’d like to acknowledge Phil Fersht, VP, Everest Group, for helping us finalizing the list.

TOP 10 PROCUREMENT PROVIDERS
Accenture
www.accenture.com
Procurement business process outsourcing services are delivered by Accenture Procurement Solutions, an Accenture business that provides source-to-pay services to global enterprises and governments on an outsourced basis. Accenture offers a full suite of source-to-pay BPO services to helps clients move towards high-performance procurement and improve the bottom line by delivering spend savings, reducing the overall cost of acquiring third-party goods and services, establishing and developing good vendor relationships, and improving efficiency and effectiveness of all procurement–related activities. Benefits delivered include driving spend savings to the P&L, lower operational costs, increased business insight around source-to-pay-processes, and tighter controls.

Deals to Date: Accenture Procurement Solutions has been established for more than 10 years. Currently provides 16 major clients with multi-process procurement business process outsourcing solutions. In addition, 30 clients are served in its finance and accounting business, where the scope of services includes payment processing from purchase order setup through payment.

Client(s): Key clients include: Bank of Ireland, Deutsche Bank, New Century Mortgage, Unilever, Erste Bank, and Accenture itself.

Services: Sourcing and category management: strategic sourcing, portfolio management, and ongoing category management; Procurement services: buying support, PO and invoice processing, T&E processing, customer care, contract services, supplier services, supplier enablement and control, event management services, and application management; and business insights—compliance reporting, reporting and analytics, SLA reporting, and ad hoc reporting.

Most Common Metrics: Spend savings, percent policy compliance, supplier reduction, improved contract management, enhanced customer
satisfaction, supplier performance, order accuracy, delivery date, invoice accuracy, buyer satisfaction, transaction accuracy, standard call center performance, and employee retention.

Ariba Inc.
www.ariba.com/solutions/man_serv_overview.cfm
Ariba, Inc. is a provider of spend management solutions to help companies realize rapid and sustainable bottom-line results. Ariba’s procurement outsourcing solutions provide tailored services to reduce total spend by managing non-strategic spend categories, processes, and procurement infrastructure on behalf of clients. Procurement outsourcing enables clients to materially increase net income, free-up cash flow, improve predictability, and gain control over SG&A expenses, and maximize the value of their financial supply chain. Ariba’s non-strategic spend categories can comprise between 50 to 60 percent of a client’s SG&A expenses, meaning that a realized savings of 15 to 25 percent in these categories can materially increase net income.

Deals to Date: Ariba analyzes, sources, contracts, procures, and manages roughly $61 billion in aggregate spend on behalf of 40 managed
services clients.

Client(s): Harris Corporation, Lucent Technologies, V&M Star.

Services:End-to-end procurement management: office supplies, global travel, maintenance, repair and operations, HR and benefits, marketing and advertising, printing services, facilities management, IT hardware and software, temporary labor telecom and network services, business and professional services, capital equipment and leasing, utilities, energy, environmental and health services, transportation and logistics, insurance, and select direct materials spend.

Spend management processes: spend analysis, sourcing and negotiations, contract development and implementation, procure-to-pay transaction processing, day-to-day category management, supplier management, application management, and buyer/supplier contact centers.

Most Common Metrics: Spend under management: 50 to 60 percent of client’s total SG&A expenses, or 80 to 100 percent of total indirect spend, Realized savings on spend: more than 15 to 25 percent realized bankable savings, Percent of spend under centralized visibility: 100 percent, Contract Compliance: 95 to 100 percent, Purchase order cycle time: 1-2 days, and client satisfaction score: 95 to 100 percent.

Capgemini
www.capgemini.com
With more than 30 years’ experience and a global workforce of more than 15,000 outsourcing professionals, Capgemini currently collaborates on some of the world’s largest outsourcing contracts. Leading companies entrust the global provider as a results-driven business partner to solve their most complex business problems. Capgemini offers a full-spectrum of services, including application management, infrastructure management, business process outsourcing, and transformational outsourcing. Capgemini provides flexible and scalable solutions through more than 100 integrated delivery centers globally.

Deals to Date: Capgemini has been engaged with more than 10 clients involving BPO services across the source-to-settle functional areas.

Client(s): Blue Scope Steel, Dairy Farm, HRMS, Hydro One, Jardines, Mandarin Hotels, Scottish Executive, Torvald Klaveness, TXU.

Services: Strategic sourcing (direct and indirect), spot buying, contract management, supplier enablement, order management, accounts payable (invoice receipt and settlement), payment processing, pcard, help-desk support, reporting/query management, and compliance management.

Most Common Metrics: Service level agreements (SLAs) and key performance indicators (KPIs ) measured and reported on regular intervals include sourcing savings, P2P processing times (POs, invoices, etc.), response times (help desk), issue resolution times, etc.

Corbus LLC
www.corbus.com
Corbus, an SEI CMMi level-5 company, is a leading global IT and supply-chain services and solutions provider. Established in 1994, Corbus focuses on building long-term relationships and is a leader in the field of managing offshore model of supply chain management with a decade of experience of being associated with world-renowned organizations. Its facility in India is manned with experts in the field who have an ability to procure for clients based in the U.S. and U.K. from a global network of suppliers in cost-saving markets of Asia and an existing supplier base in the U.S. and Europe. Corbus’ supply-chain service offerings are designed to keep in mind that global competition and price depreciation will maintain pressure on the client to reduce costs and improve operational efficiency.

Deals to Date: Source to pay: responsible for managing a complete spend for clients over source to pay; Analyze to Contract: supports clients in identifying the best source of supply and helping them in the process of awarding the contract for supply; Procure to Pay: Under these engagements, Corbus is supporting clients in managing day-to-day transactions over procure to pay.

Client(s): Largest clients are OEMs (original equipment manufacturers) and Fortune-listed companies in the areas of aerospace, automotive, and telecom.

Services: Consulting: client support in “opportunity discovery and assessment” of an outsourcing initiative to create a report and road map for outsourcing and help streamline current processes in accordance with global best practices; Managed services: manage the procurement process from source to pay to helping reduce process cost and bringing operational efficiencies (guaranteed 20 percent cost reduction in process cost by leveraging the Corbus global delivery model); Low-cost country sourcing (LCCS): in sourcing from low-cost countries to deliver assured product cost savings with reduced cost of sourcing by working as an extension of client offices in low-cost country sourcing.

Most Common Metrics: Cost reduction/deflation, quality, delivery, and service delivery turn around time.

DSSI LLC
www.directsourcing.com
DSSI is a purchasing services company offering a full range of purchasing solutions from sourcing management, procure-to-pay processing, and consulting to full BPO outsourcing. With in-depth expertise in the manufacturing industry (particularly automotive), DSSI’s services provide a significant and sustainable approach to reduce material and service costs, decrease process costs, and improve operational service levels by transforming the procurement process. DSSI’s outsourced procurement services include efficient transactional processing from PO placement through financial settlement enabled by DSSI’s hosted procurement tool, Epic, which allows clients to perform online requisitioning through approvals through tracking the order to receipt and reporting. DSSI’s purchasing professionals manage supplier relationships, performing the strategic sourcing and commodity management.

Deals to Date: Eleven outsourced clients with Johnson Controls and Metaldyne, renewing their contracts in 2005. The following BPO clients have outsourced their indirect spend to DSSI: Johnson Controls Inc. (2001), Metaldyne Corporation (2001), Delphi Corporation (2002), DURA Automotive (2004), FCI Connect (2004), Visant (2005), GDX Automotive (2005), Diversified Machine Inc. (2006), Jernberg Industries (2006), Federal-Mogul (2006), and FormTech (2006). Although the commodity categories differ based on client purchases, DSSI manages spend in the following five categories: IT hardware, software and peripherals; office supplies and equipment; MRO/ plant; chemicals; and services.
DSSI started with a single client in 1999 with $80 million in spend under management. In 2005, DSSI managed $480 million in contacted spend.

Client(s): Delphi Corp, DURA Automotive Systems, Federal-Mogul, Johnson Controls, Inc., and Visant.

Services: On-site data mining, data cleansing and normalization, strategic sourcing, customized catalog builds, e-procurement site hosting, transactional processing, request-for-quote and spot-buy management, financial settlement, data warehousing and reporting, commodity management, supplier relationship management, vendor managed programs, product standardization programs, client and supplier system connectivity, launch and implementation management, communications and training, and help-desk support.

Most Common Metrics: Spend-through program, cost savings generated, po/rfq/spot-buy timing, and supplier performance including delivery timing.

Genpact
www.www.genpact.com
Genpact is a global BPO/ITO provider of high-quality business and technology services. It delivers business impact through operational excellence and helping global enterprises improve their revenue, cash, costs, margins, speed, and customer relationships. Genpact’s supply-chain and procurement offerings entails organizing the cost-effective flow and storage of materials, in-process inventory, finished goods, and related information from point of origin to point of consumption to satisfy customer requirements. Supply chain management (SCM) is an integrated offering spanning across many products and delivery capabilities. The core SCM offerings leverage Genpact’s service delivery capability in manufacturing and industrial vertical along with its analytics and software capability to provide comprehensive supply-chain solutions.

Deals to Date: Three global automotive OEMs (original equipment manufacturers), one global EMS, one pharmaceutical, one banking equipment manufacturer, and one other discreet manufacturer, all in 2006.

Client(s): Automotive, OEMs, EMS, top five pharmaceuticals, GE Industrial, GE Plastics, and Penske Logistics.

Services: Strategic category/commodity management, direct and indirect procurement; procurement to pay, sales, inventory and operational planning, demand planning, forecasting and advance analytics, logistics services, post-sales and after-market services, reverse logistics, and order fulfillment

Most Common Metrics: Deflation, turnaround time, accuracy, and flexibility.

Hewlett Packard Company
www.hp.com
HP is a technology solutions provider to consumers, businesses and institutions globally. The company’s offerings span IT infrastructure, global services, business and home computing, and imaging and printing. For the four fiscal quarters ended April 30, 2006, HP revenue totaled $88.9 billion.

Deals to Date: Customer agreements preclude sharing specific data.

Client(s): Customer agreements preclude sharing specific data.

Services: Strategic sourcing, transaction processing, and accounts payable with planning underway for category management and supplier management services. Focus to date has been on indirect procurement (primarily transaction processing and tactical buying) as an extension of broader F&A BPO services/offer. However, HP also offers a niche direct procurement solution (“buy-sell”) in support of outsourced manufacturing that includes sourcing, supplier/category management, transaction processing, and logistics.

Most Common Metrics: Cycle time, savings, compliance, percent spend on purchase orders, and percent spend on contract.

IBM
www.ibm.com
IBM strives to lead in the invention, development, and manufacture of the industry’s most advanced information technologies, including computer systems, software, storage systems, and microelectronics, translating these advanced technologies into value for its customers through its professional solutions, services, and consulting businesses worldwide.

Deals to Date: More than 25: Colgate-Palmolive Company (CL) signed a seven-year agreement with IBM to provide procurement services for designated materials and services worldwide and to provide accounts payable services for Europe and North America. Total savings from the plan are projected to be in the range of $250 to $300 million after- tax.

Solectron Corporation, a leading provider of electronics manufacturing and integrated supply chain services, signed a long-term contract for indirect procurement services across 17 countries. IBM will manage more than $1.2 billion per year of indirect spend in areas such as temporary contract services, office equipment, utilities, and telecommunications.

IBM signed an agreement to transform and manage strategic sourcing and procurement operations of indirect materials and services for Unilever’s North American operations. In addition to improving cost efficiency, IBM will work with Unilever North America to optimize procurement processes and deploy industry-leading analytics tools and process methodologies. IBM will also leverage its technology expertise and network of procurement transformation centers of excellence, which already manage optimized procurement processes for several IBM customers worldwide.

Client(s): Colgate-Palmolive, Coty, Goodyear, Solectron, Unilever, UTC.

Services: Complete procure-to-pay indirect and direct procurement outsourcing, market intelligence (competitive analysis and industry environment, general China country market intelligence, specific China industry and category opportunities, supplier and product-specific opportunities); sourcing strategy (analyze current sourcing, supply-base development, identify opportunities, recommend alternatives); supplier selection (develop approved vendor list, certify suppliers, product-specific qualifications, RFx processes, negotiate contract to closure).

IBM also offers complementary solutions such as cost estimation, supplier management, procurement engineering, process consulting, training, rapid prototyping, tooling management, price-masking transaction services, supply balancing/visibility, and global and other low-cost jurisdiction (e.g. Mexico, Eastern Europe) sourcing opportunities.

Most Common Metrics: Quality, savings, customer satisfaction, and purchase order processing time.

ICG Commerce
www.icgcommerce.com
ICG Commerce is a procurement services provider committed to helping companies improve procurement performance significantly and continuously. It has a comprehensive range of services supported by experienced and dedicated category and process specialists; unmatched market insight, tools and information; and the highest standards of process and operational excellence to deliver meaningful and measurable results.

Deals to Date: 14 comprehensive long-term relationships as follows:
• Avaya—operations management for 100 percent of U.S. indirect procurement and full BPO services for 20 percent of indirect including select
sourcing of global contracts;
• Qualxserv—full BPO services in the U.S.;
• CarMax—operations management for indirect procurement;
• Aerospace manufacturing company—full BPO for indirect procurement;
• Timken—full BPO services in the U.S. and Europe for non-manufacturing spend;
• Cameron—full BPO services in the U.S. and select sourcing of global contracts;
• Greif—sourcing, category management, and information management and reporting of indirect spend including select sourcing of global contracts ;
• Goodyear—full BPO services for North American tire business unit;
• Crown Cork and Sea—full BPO services in U.S.;
• North American retailer—full BPO services;
• Rent-a-center—full BPO services;
• A global CPG company—operations management for 100 percent of the company’ North American plant, non-manufacturing spend;
• A global CPG company—sourcing and category management for select indirect categories;
• Global technology company—full BPO services across a variety of categories and locations including North America and India;

Client(s): Avaya, Delta, Goodyear, Nordstrom, Timken.

Services: Strategic sourcing including supplier and contract implementation, operations management delivered through customer-dedicated “buying center,” category management focusing on delivering continuous cost reductions through supplier management and process improvement, and information management and reporting delivered through advanced automation and dedicated personnel that help derive insight and information from spend.

Most Common Metrics: Savings target, process compliance, staff retention, customer survey results, preferred/approved supplier compliance, supplier reduction—sourced suppliers vs. total suppliers, transaction accuracy, catalog accuracy, supplier diversity spend, call center metrics, number of agreements implemented, sourced spend as a percent of total spend, and invoice reduction.

Progeon Limited
www.progeon.com
Progeon is the BPO subsidiary of Infosys Technologies. Since inception, Progeon has focused on end-to-end outsourcing and operates on the principle that true BPO is transformational—in addition to cost arbitrage, Progeon consistently demonstrates enterprise-wide improvement in client operations through process optimization, process reengineering, and best practices. Progeon operates in India, Czech Republic, China, and the Philippines, and employs approximately 8,000 people. Progeon procurement delivers transformational source-to-pay outsourcing for global corporations. It missions is helping customers convert fixed costs to variable costs and improve profitability, service levels, internal customer satisfaction, and productivity. Progeon’s procurement product management team has more than 100 person-years of experience in purchasing, global sourcing, low-cost country sourcing, supply chain management, procurement transformation, and consulting across industries and countries.

Deals to Date: Fortune 3 oil and gas company: Progeon provides third-party (flex) staffing, indirect procurement, contract management, indirect sourcing, supplier performance and portfolio management, reverse auction management, and procurement systems support
Global commodity producer: Progeon provides inventory (MRO) procurement, low value buying, blanket purchase agreement (BPA), maintenance, vendor management, and accounts payables.

Client(s): Fortune 3 oil and gas company, global commodity producer, leading software services reseller, and global communication service provider.

Services: Strategic procurement: spend analytics and reporting, demand planning (management), strategic sourcing (indirect goods and services), RFx process management, dynamic price bid management/reverse auction management, supplier adoption and collaboration, supplier performance management; Transactional procurement: requisition review and approval, purchase order award and processing, purchase order administration, expediting and logistics coordination, receipt and return management, rental equipment management, supplier help-desk, vendor master management, catalog and content management, and payment processing; Procurement platform-based solutions: flex staffing and contract management.

Most Common Metrics: Negotiated savings, quality, productivity, turn around time.