Global myths of procurement outsourcing: series summary

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This, my final post for 2012, is a round-up of all the posts in our global myths of procurement outsourcing series. I'd like to thank everyone who contributed comments and offered insight towards dispelling some of the common myths that circulate around procurement outsourcing. Hopefully we have gone some way to help achieving that.

Procurement outsourcing is a rapidly emerging model for how to operate a core business function.  As an organization that is blazing the trail in this area, we face some interesting challenges.

A crucial one for us is enabling the market to understand what procurement outsourcing is.  And what it is not.  And, perhaps unsurprisingly for a new area, there are a lot of misconceptions out there.

For example, there is no market wide view of what procurement outsourcing is.  Instead, the understanding amongst Finance and Procurement leaders is wide and varied – largely based on people’s fears, hopes, experiences and expectations.  As a result, there are many myths in the market around procurement outsourcing.

This blog series was written to dispel some of these common myths that circulate around procurement outsourcing, and hopefully we have gone some way to help achieving that.  To set the record straight, here’s a summary of the truths that counter the myths.

• The ROI from procurement comes from investing to save. It DOES NOT come from reducing the cost to serve. By investing in a model that is able to deliver a service way above what is achievable in-house, and is sustainable over the long term, a large ROI is generated
• The ROI from procurement outsourcing is greater than most other investment decisions senior executives can make.  Typically, it generates a ROI in the first few years of 15-20 times, and sometimes even more.  Beyond then, when a cost base is reached - it’s about maximizing value for money and ensuring the cost base doesn’t drift back to its previous level
• Any quality provider of procurement outsourcing will invest heavily in business partnering.  As a result, the service received by the business goes up.  In turn, people will seek out procurement, when previously they did whatever they could to get around it.  And that’s because it becomes easier, faster, more insightful and better value for money with procurement’s involvement
• Procurement outsourcing increases the level of control a CFO has over his cost base, and reduces the level of risk the business faces
• Procurement outsourcing with Proxima is an on-shore/ near-shore model.  We create on-shore jobs in both US and Europe

I hope you have enjoyed this series.  I am always interested to hear people’s views on this subject – procurement outsourcing is still an emerging option for organizations, and until it is firmly established, there is an educational journey and debate to be had about around it.