A recent episode of 60 Minutes investigating outsourcing and the increasingly under-fire H-1B visa program in the USA has prompted a good degree of debate on social media and elsewhere, about this always-controversial practice. As readers of SIG blogs (and indeed members of the sourcing and outsourcing community globally) will need little reminding, outsourcing and its practitioners present an easy target for anyone with an economic axe to grind looking for someone or something to blame for the perceived ailments of the American (or any other) economy, especially unemployment: those giving voice to the old lament that outsourcing (conflated, of course, with offshoring) "sends our jobs overseas" now also point to the H-1B visa and charge those companies not "guilty" of exporting jobs with the equally heinous crime of keeping them onshore but giving them to foreign workers instead.
Yet despite decades of such negative PR the model continues to prove an indispensable tool for organizations large and small. Earlier this month, to take just one recent example, Lloyds Banking Group in the UK announced plans for a £1.3bn ($1.6 bn) ITO deal with IBM which will see over 1,900 jobs transferred to the latter; the deal is intended to save approximately £760m ($948 bn) in costs, according to the Financial Times (which, incidentally, quoted the Lloyds Trade Union - "which is no longer recognized by the bank" - as writing to its members that "staff transferred to IBM will be kept on for a year but most would be laid off within four years and replaced by cheaper, offshore workers").
Of the many laws that affect the international outsourcing space, one of the most important must be that of diminishing returns. At its heart outsourcing is about efficiency – a provider can only offer a decent value proposition, and turn a profit, if it can achieve a desired output more efficiently than can a would-be buyer of its services – and yet there’s only so much money in the hypothetical pot to invest in driving efficiencies: as a very basic example, if one can spend $x to achieve 10% savings, by the fifth investment of $x the savings made are only around 60% of what was achieved with the first tranche. The returns diminish. After a while, it becomes less and less worthwhile to invest $x in that project, when the same amount put into another deal can yield significantly more.
Finding the right balance between investment and returns (and knowing where is the line beyond which further investment will yield returns too paltry to justify) is vital in any business, but especially one as efficiency-based as outsourcing, where relationships have historically often featured buyers demanding constant and consistent efficiency gains and savings – and, moreover, where the necessary investments in technology and people can be gigantic. Hence the desire on the part of providers to share the value gained by any given investment across as many clients as possible – and the complications resulting from buy-side demands for bespoke work and customisation without a simultaneous understanding of why this of necessity means higher costs, which need to be passed on somewhere, somehow…
As February started, an important conversation got underway: SIG was back in the City of London with a highly engaged group of procurement professionals to explore the latest trends and topics that are shaping their world.
The role of the CPO has come a long way over the last 20 years and change is exponential; happening across the what, how and who of procurement
What: organizations are buying new products and services (everything "As A Service," digital and digital-enablers, RPA and other automation tools and services)
How: new tools and techniques are being deployed in procurement both because these new products and services need to be acquired in new ways and to drive productivity and effectiveness through analytics and better insight
Who: a growing millennial workforce and digital workforce presents new opportunities and challenges for operational management of services
A recent study from IBM shows that the highest priorities for the CPO are to contribute to revenue growth, to drive innovation across the supply chain and to protect the enterprise brand. Cost is mentioned nowhere, but more because it goes without saying and not because it is no longer a priority.
So, the CPO and their teams are making a strategic contribution to the organization but still find themselves a step removed from the centers of power as they report in through another function and are rarely represented on the board. In a period of exponential change is this procurement’s opportunity to rise to the challenge and enable safe, profitable, innovative growth to earn their place on the top floor?
With so much attention currently focused on the political arena (most obviously, of course, in the USA with the inauguration of President Trump) it’s easy to become carried away in one’s assessments of the extent to which “politics” drives actual change. Of course, there’s no doubting the scale of the significance of the Trump election, or the Brexit vote, or similar “watershed moments” – but the nature of that significance is somewhat less clear, especially when it comes to the impacts on specific aspects of our lives. It’s somewhat comforting (or perhaps not, depending on one’s affiliation) to think that the person nominally in charge of a country is indeed that – it plays to our natural human desire for order, comprehensibility, justice – but in a world as interconnected and complex as this one, is it not a serious error to overstate the ability of a President Trump, a Prime Minister May and others in similar positions around the world truly to steer a course, rather than simply to keep their ships of state upright in the storm?
Look at the sourcing and outsourcing space specifically. In a number of particular areas President Trump could well have a huge impact: a crackdown on immigration and the offshoring of work, changes to NAFTA, the reversal of the ACA and other policies would affect very substantially certain tranches of the space and those working within them. Likewise, in the UK the way Theresa May is approaching the exit from the EU and the Single Market has deep significance for businesses working in and with the United Kingdom for data protection, for accounting and a host of other areas.
And like that, another one is behind us. For months we plan every little detail to make our Summit a memorable event for our delegates. We coach speakers, edit session presentations, order matching linens, create signage and think through every thing that can go wrong to make sure that it doesn’t. And then it’s over. Just like that. The delegates have gone home, the sessions have been evaluated and everything has been shipped. But the memories of the event linger and one thing has become more and more clear with each passing event…the sourcing function is no longer back-office. It has not just gone from tactical to strategic, but is also leading companies in tackling some of the biggest issues facing our members today. Sourcing has gone mainstream. These observations from the most recent SIG Global Executive Summit highlight these points.
Data is the word of the day. And I don’t just mean “Big Data” although that is certainly a “big” part of it. Data is the key to better understanding customers. It is the way we can predict future supply needs. And yes—using “Big Data” we can teach computers to replace even complex procurement functions with little to no errors. But now Procurement groups are also hiring Data Scientists to turn that data into tangible outcomes. The baseline for smart systems is getting the data right, so pay attention…you will see the Data Scientist trend on the rise.
As the editor of Outsource (a member of the SIG family, of course, since January this year) it’s my great privilege to publish articles by some of the best-known figures in the space: authors whose very names have become synonymous with cutting-edge thought leadership and the kind of insight which itself drives change within this dynamic, fascinating industry. However, it’s also always crucial for me to remember that great insight and high-quality communication are not the sole preserve of the established sourcing superstar; that right now, out there scattered across the wide, wild world are a host of undiscovered B2B literary marvels – as-yet-unsung thought leaders whose talents lie like diamonds, buried but waiting only for the miner’s pick to swing in the right direction.
Well, it’s time for Outsource to go mining…we’re launching a writing competition aimed at discovering those diamonds and bringing them out into the light – and, what’s more, thanks to our excellent colleagues at SIG University we’ve got the perfect prize with which to tempt the next generation of outsourcing authors to sharpen their quills: a place in the next semester of the Certified Sourcing Professional course! (And if the winner doesn’t meet SIG U’s entry criteria he or she can transfer the prize to a colleague who does; how’s that for a way to grab the attention of the top brass?)
Jamie Liddell, Editor, Outsource and Co-Head of EMEA, SIG
After a period of immense volatility, the banking sector appears to be reaching some level of normalcy. The financial crisis of 2008 was the trigger for drastic changes in the way the industry manages spend. As revenue streams froze and the spending behaviors of banks become front-page news, procurement was invariably thrust into the spotlight as a means of preserving the reputation and profitability of these organizations. Procurement teams operating in the banking environment face a challenging landscape when it comes to controlling spend. A great deal of change is needed, both structurally and culturally before banks can truly take control of their spend. However, procurement technology, if used effectively, can be a vital catalyst for these required changes.
What are they buying? Banks are essentially service organizations. The vast majority of their spend passes the professional service category (roughly 40%) in the form of management consultants and other temporary workers. Information technology and facilities management make up the next largest spend categories accounting for roughly 20% of total spend each. Spend on services is traditionally more difficult to analyze, understand and control than spend on goods, and this presents a challenge for a service heavy industry like banking. However, by leveraging procurement technologies, leading banks are addressing these areas with great success.
Diptarup Chakraborti, Vice President, Global Marketing, Zycus
Dawn Tiura, SIG CEO and President recently spoke on an expert panel at Coupa Inspire, and shared her thoughts with candor and authority. Coupa interviewed Dawn shortly after the event and published a blog sharing her responses which we are publishing with Coupa's permission. The original can also be found on the Coupa website.
Thanks to Coupa for the blog interview below: One of our favorite parts of Coupa Inspire are the expert panels. There's nothing we love more than getting smart people together to talk shop. If you missed Inspire, you can read excerpts of the analyst panel and the CIO panel on our blog. Today we're talking with Dawn Tiura as a follow up to the analyst panel. Dawn is CEO of Sourcing Industry Group (SIG) and has been observing the industry for 25 years from her vantage point as a CPA turned sourcing consultant. There's no one smarter on the topic of where sourcing is heading, so when she remarked during the panel that in her opinion, the term buyer should be eradicated, that piqued our curiosity. So, we got her on the phone to learn more.
Coupa: You had some provocative things to say during our panel discussion. One was that you wished the 'buyer' title would go away. We were hoping you could expand on that.
Dawn: I sure could! To me, buyer is such a demeaning title. The only time somebody is excited to say, "I'm a buyer" is if they're in the fashion industry, because that's cool and exciting and sexy.
Amazon. The name alone makes you think of something big. So it makes sense that they might have something grandiose on the horizon.
With that in mind, I want to start a conversation about whether Amazon might be the next Ariba or Coupa. I heard a rumor that 10 or so Ariba people have gone to Amazon with the intention of making it the next and biggest B2B network in the world. Think about it, we all know how to use Amazon, they have a network that is massive, they have distribution and delivery capabilities, so why couldn't they host additional suppliers and be the purchasing platform for businesses? Amazon has the money, they know how to fill demand, they are nimble, they are constantly innovating...what is to stop them?! They could fairly easily add a feature that limits our searching to approved items with our company's contracted pricing (that it knows to show when we log on with our company credentials) and then check us out with a credit card or even link directly to our accounts payable systems.
Amazon is wildly successful, has a surplus of cash and has set the standard for online purchasing and customer service...so why not go a step further and move from the B2C to the B2B world? I was in the San Francisco Bay Area recently to speak at Coupa Inspire. I love being in the Bay Area surrounded by brilliant people with amazing thoughts and aspirations. After living there for 30 years, I should not be surprised by the number of new companies, ideas and appetite for innovation, however I always am. While there, I spent an evening with my oldest son and his girlfriend, both typical millennials working in Silicon Valley. We started "what iffing" and (since my son has grown up with me as a mom talking supply chain and sourcing and spent time working for Coupa) we convinced ourselves that this is distinctly possible. So was it the wine...or are you drinking the Kool-Aid and see the possibilities here too??
How many settings does a washing machine need...or for that matter, a camera? It seems that the more settings there are, the higher the price. Of course this seems right, doesn't it? If you're emptying your pockets (or even your bank account) to get the latest and greatest device, whatever it is, you want to be sure it can do absolutely everything. You want it to handle your bed linens as well as your silk shirts (the washing machine, that is, not the camera). Most washing machines CAN do all of that, but wouldn't it be nice if you could just set them to automatic? In my household we used to have a washing machine with a dial labeled "A to J." We always put it on "E" which we decided stood for "Everything." But would we pay as much for a device that only had one button? Perhaps a big friendly button that had "Wash" written on it? Almost certainly not.
Paul Blake, Senior Manager, Technology Product Marketing, GEP