Procurement Outsourcing, compared to the more established practices in finance, accounting and HR, relatively new area that has been garnering significant attention because of its ability to have a much larger impact on an organization

1. TM
Synergy
Think beyond boundaries…
One-Stop-Shop for Sourcing and Procurement
1
3/27/2011 http://www.strombus.in/

2. Procurement Outsourcing
Emerging Opportunities
2
3/27/2011 http://www.strombus.in/

3. Procurement Outsourcing
Emerging Opportunities
• Introduction
• Procurement as Core Business
"Is procurement core?" There's only one correct answer, yes?
• Procurement shifts from Traditional to Contemporary!
• Why companies outsource – Value Proposition
• Ideology vis-à-vis Integrity
3
3/27/2011 http://www.strombus.in/

4. Procurement Outsourcing
Emerging Opportunities
Introduction
Outsourcing
• Reduce and control operating costs
• Improve company focus
• Gain access to world-class capabilities
• Free internal resources for other purposes
• A function is time-consuming to manage or is out of control
• Insufficient resources are available internally
• Share risks with a partner company
4
3/27/2011 http://www.strombus.in/

5. Procurement Outsourcing
Emerging Opportunities
Introduction
Procurement Outsourcing (PO)
• Increasing Effectiveness of Procurement
• Partnering with someone who expert in procurement & sourcing
• Availability of Temporary Resources to fulfill Temporary requirement
• Expand the variety and looking for established sourcing arrangements
• Innovative approach to manage and visualize Spend
• PSPs insights, analysis and recommendations to procurement to assist in
developing corporate supply and sourcing strategies, savings targets,
savings analysis and other special programs
• No compromise on basic philosophies of Procurement
5
3/27/2011 http://www.strombus.in/

6. Procurement Outsourcing
Emerging Opportunities
Introduction
PO - Least Understood Area
• PO is one of the least-understood area, but awareness is increasing
through both growth in the sector and an increasing body of research and
articles • PO, compared to the more established practices
in finance, accounting and HR, relatively new
area that has been garnering significant
attention because of its ability to have a much
larger impact on an organization
6
3/27/2011 http://www.strombus.in/

7. Procurement Outsourcing
Emerging Opportunities
Introduction
PO – incomparable effects
• According to studies conducted by different analyst firms including IDC,
Procurement outsourcing is growing faster than IT services, Finance and
Accounting and HR outsourcing. Reason, see the effect of PO:
20%
18% Procurement Outsourcing
16%
14% Human Resource Outsourcing
12%
10% F & A Outsourcing
8%
6% Customer Care Outsourcing
4%
2% IT Outsourcing
0%
2005 2006 2007 2008 2009
7
3/27/2011 http://www.strombus.in/

8. Procurement Outsourcing
Emerging Opportunities
Introduction
PO – an emerging opportunity
Spend matters……..so is procurement outsourcing a strategic imperative?
• Market indicators strongly suggest that procurement outsourcing is at an
inflection point and will be a prominent strategy in 2011.
• Attitudes about procurement outsourcing are changing, confidence and
acceptance are rising, and so is contract activity.
8
3/27/2011 http://www.strombus.in/

9. Procurement Outsourcing
Emerging Opportunities
Introduction
PO – Rising Sun
• From conversations with sourcing advisors such as TPI
we hear that there has been a dramatic increase in the
number of procurement outsourcing deals signed in 2009.
• TPI measured 83 contract signings in 2009 – the most on record in any
single year. Large contracts, those with total contract value (TCV) of $25
million or more, increased 25 percent to their second-highest level ever.
• What is potentially an even more compelling finding is that there was a 43
percent increase in smaller contracts, and these engagements tend to
expand year over year to become larger contracts.
This is as per one of reports in Procurebuzz
9
3/27/2011 http://www.strombus.in/

10. Procurement Outsourcing
Emerging Opportunities
Introduction
BPO & KPO
• As per DNB after BPO, KPO
Knowledge Process Outsourcing is
gradually unfolding next great opportunity for India.
• In fact India, with its abundant skilled resources and
competitive cost advantage is all set to bank on this next big thing.
• The KPO requires domain knowledge, analytical skills and decision making
capabilities.
• KPO is defined as high end knowledge work which includes equity &
finance, intellectual property rights, analytics, business
research, market research, investment analysis, data
management etc.
10
3/27/2011 http://www.strombus.in/

11. Procurement Outsourcing
Emerging Opportunities
Introduction
PO – an emerging trend
• One of it’s Emerging Vertical is Procurement Outsourcing (PO).
• Indian BPO companies are gearing up for PO
boom to tap the potential of the segment due
to its competitive advantage.
11 Procurement Core
3/27/2011 http://www.strombus.in/

12. Procurement Outsourcing
Emerging Opportunities
Challenge
The biggest challenge for the procurement manager is the attitude of the
management “Why care about procurement”.
There is need to discover and realize areas of left over potential avenues.
Some of them:
• Transparency
– lack of consistent, timely and accurate information
• Skills
– inadequate category-specific sourcing buying expertise
• Resources
– lack of investment or executive sponsorship for
corporate procurement control
12
3/27/2011 http://www.strombus.in/

13. Procurement Outsourcing
Emerging Opportunities
Procurement as Core Business
"Is procurement core?" There's only one correct answer, yes?
If only it were that simple!
• While there is little debate that procurement is important, whether the
function and profession in their current states are truly core is
comparatively murky depending on whom you ask.
• In the eyes of many insiders and observers, talent
and investment should be top priorities to ensure
that procurement is perceived as core to the business.
• It is an area requiring judgment, cross-functional
coordination, proactive risk and change management.
• Core function is something that brings distinctive competitive edge to a
corporation and is something the corporation does distinctively better
than the next guy
13
3/27/2011 http://www.strombus.in/

14. Procurement Outsourcing
Emerging Opportunities
Procurement shifts from Traditional to Contemporary!
The traditional purchasing process
• The traditional purchasing process involved several steps—requisition,
soliciting bids, purchase order, shipping advice, invoice, and payment—
that have come to be increasingly regarded as unacceptably slow,
expensive, and labor intensive.
• Each transaction generated its own paper trail, and
the same process had to be followed whether the
item being purchased was a box of paper clips or a
new bulldozer.
14
3/27/2011 http://www.strombus.in/

15. Procurement Outsourcing
Emerging Opportunities
Procurement shifts from Traditional to Contemporary!
Contemporary
• That attitude has changed in recent years, in part because of highly
publicized cases wherein companies have achieved stunning bottom-line
gains through revamped purchasing processes.
• In addition, increased competition on both the domestic and global levels
has led many companies to recognize that purchasing
can actually have important strategic functions.
• As a result, new strategies are being used in
purchasing departments at companies of all size.
15
3/27/2011 http://www.strombus.in/

16. Procurement Outsourcing
Emerging Opportunities
Procurement shifts from Traditional to Contemporary!
Contemporary
• Analysts observe that in this new purchasing
environment, a guideline known as the
total cost of ownership (TCO) has come to
be a paramount concern in purchasing decisions.
• Instead of buying the good or service that has
the lowest price, the buyer instead
weighs a series of additional factors when
determining what the true cost of the good or
service is to his or her company.
To lower TCO, companies are taking a number of steps to improve purchasing
16
3/27/2011 http://www.strombus.in/

17. Procurement Outsourcing
Emerging Opportunities
Procurement shifts from Traditional to Contemporary!
Shift to strategic sourcing
• Strategic sourcing is one of the key methods that purchasing departments
are using to lower costs and improve quality.
• Strategic sourcing involve
– analyzing what products the company buys in the highest volume,
– reviewing the marketplace for those products,
– understanding the economics and usage of the supplier of those products,
– developing a procurement strategy,
– establishing working relationships with the suppliers that are much more
integrated than such relationships were in the past
17
3/27/2011 http://www.strombus.in/

18. Procurement Outsourcing
Emerging Opportunities
Procurement shifts from Traditional to Contemporary!
Empowering teams
In addition to strategic sourcing, there are other methods companies can
use to improve purchasing!!
• Creating cross-functional teams that involve purchasing personnel in every
stage of the product design process.
• In the past, purchasers were not involved at all in the design process. They
were simply instructed to purchase the necessary materials once a new
product had been created.
18 Value Proposition
3/27/2011 http://www.strombus.in/

19. Procurement Outsourcing
Emerging Opportunities
Why companies outsource
Value Proposition
• Specialized procurement service providers are dedicated to
procurement and have developed a strong expertise in
procurement and procurement outsourcing
• Economic Improvement
– Reduction in Purchase and Operation Cost
– Substantial and sustained savings
– Increased spend leverage and control
19
3/27/2011 http://www.strombus.in/

20. Procurement Outsourcing
Emerging Opportunities
Why companies outsource
Value Proposition
• Service Improvement
– Innovate procurement practices
– Timely Deliveries
• Spend Management
– Prior planning
– Minimize the effects of unpredictable economy
– Strategic sourcing process
– Identify opportunities for savings
– Make the Spend more visualized
– Enhanced Decision Making
20
3/27/2011 http://www.strombus.in/

21. Procurement Outsourcing
Emerging Opportunities
Why companies outsource
Value Proposition
• Market Intelligence
– Enrich the base information
– Internal and external market research
– Actionable intelligence
• Risk Administration
– Controlling and minimizing uncertainties
– Leverage to the organization to focus on deliveries and implementations
– Improved contract compliance
– Reduced amount spend that non purchasing staff handles
21
3/27/2011 http://www.strombus.in/

22. Procurement Outsourcing
Emerging Opportunities
Why companies outsource
Value Proposition
• Purchase analytics
– Data Collection
– Cleansing
– Classification
– Reporting / Analysis
• Business Intelligence
– Benchmarking
– Critical to Quality (CTQ)
– Alerts & Alarms
– Work flows with escalations
– Auto redemption of processes
– Self audits
22
3/27/2011 http://www.strombus.in/

23. Procurement Outsourcing
Emerging Opportunities
Why companies outsource
PO Benefits
Improved Spend
44%
Visibility
Market & Supplier
46%
Intelligence
Head Count
46%
Reduction
Lower
47%
Procurement Cost
Improved Pricing 56%
23 Ideology / Integrity
3/27/2011 http://www.strombus.in/

24. Procurement Outsourcing
Emerging Opportunities
Ideology vis-à-vis Integrity
Ideology
• Outsourced procurement teams allow companies to benefit immediately
from experienced procurement specialists support & expertise. This avoids
the creation of an internal team (new resources) and the required time for
that team to structure itself, its processes and its expertise.
24
3/27/2011 http://www.strombus.in/

25. Procurement Outsourcing
Emerging Opportunities
Ideology vis-à-vis Integrity
Integrity
• This is bread and butter, how can PSP compromise on the outputs by
looking on the short term profit in place of making long term
relationships.
25
3/27/2011 http://www.strombus.in/

26. Procurement Outsourcing
Emerging Opportunities
Ideology vis-à-vis Integrity
Integrity
• There are means and methods, if laid down properly, the chance of
loosing confidentiality can be tracked and it will be maintained intact
• The PSPs interested to create a faith and they understand the need, they
are not interested in loosing the name because of short term benefits
26
3/27/2011 http://www.strombus.in/

27. Procurement Outsourcing
Emerging Opportunities
Ideology vis-à-vis Integrity
Integrity
• The process is so transparent that it enable the partners to look into the
activities and intervene wherever needed. The client is having all the
detail transactions available at the same time, the vendors are being
communicated with all the contact information about the client.
27 Strombus
3/27/2011 http://www.strombus.in/

28. Strombus
Think Beyond Boundaries…
Ideology, Integrity and Process
• Reliability
• Ethical practices
• Continual improvement
• Competitiveness
• Work Experience
• Process Focused Not Tool
• Indirect Spend – End to End (P2P)
• Direct Spend – Spend Management
28 Future of PO
3/27/2011 http://www.strombus.in/

29. Future of PO
The Everest Group indicates that the future of Procurement Outsourcing in
India is tightly coupled with the global trends within the segment. Throwing
light on the segment it states the following:
• Global Procurement Outsourcing suppliers are beginning to utilize their
India-based centers to absorb a bulk of the transactional procurement
work
• Given the strong BPO support infrastructure that India has, it is also an
emerging destination for tactical sourcing and spend analytics
• Managing and hosting of procurement solutions is yet another big
opportunity.
• Analysts also believe that PO is not just about deriving the labor arbitrage
advantage, but also gaining access to a host of specialized manpower
skills.
29
3/27/2011 http://www.strombus.in/

30. Future of PO
Going forward, what Indian ITES-BPO companies need to build, in order to
address the PO opportunity are as follows:
• Partnerships with Category experts and sourcing managers in India
• Indian universities that offer a procurement focused curriculum
• A network of alliances in tools and technologies
• Partnerships with aggregators
• Mature outsourcing methodologies and ability to use offshoring
capabilities for cataloging, contract administration and procurement Help
Desk
30 Thank You
3/27/2011 http://www.strombus.in/

31. Future of PO
Indian companies can utilize in house support of PO and explore
opportunities:
• The companies who have no internal competencies but want to quickly
benefits from procurement action (Cost reduction, suppliers and contract
management...)
• The companies who have internal procurement expertise (department)
but want to outsource activity on specific area's like indirect materials and
services
• The companies who want to develop quickly a procurement function to
deliver savings, with a willingness to internally develop this function in the
mid term
31 Thank You
3/27/2011 http://www.strombus.in/

32. 32
3/27/2011 http://www.strombus.in/