Gear up to See Increased Market Activity in the Strategic Sourcing Space | Sherpas in Blue Shirts

Last month, WNS acquired Denali Sourcing Services, a procurement outsourcing company, to further strengthen its broader finance and accounting offering with a specific focus on the sourcing and category management domain. This was a strategic move on WNS’ part to drive enhanced value for its clients. The acquisition will allow WNS to provide an end-to-end Source-to-Pay (S2P) offering without any external dependency. The transition is expected to be mostly smooth, as WNS and Denali have been long-time partners and already have a healthy working relationship.

For the broader market, this acquisition reiterates the importance of people skills, experience, and domain knowledge in procurement services. While technology is important in any business process function, procurement outsourcing relies heavily on individual talent. Several providers have tried to develop these capabilities in-house with limited success. A major obstacle has been the short supply of sourcing talent pool, compounded by the fact that it is very challenging to provide strategic sourcing services from an offshore location.

In today’s procurement world, automation is becoming table stakes, speedily wiping out the transactional part of the work. Intense competition is further driving down pricing, leaving everyone to operate on wafer thin margins. As P2P becomes commoditized, providers are increasingly identifying the need to build sourcing capabilities. They have realized that, in addition to higher revenue and profit margins, sourcing capabilities are necessary for long-term success in this space.

One of the fastest ways to build sourcing capabilities is an acquisition. Service providers have been on a constant lookout for players with strong sourcing capabilities, and have not hesitated in making such acquisitions. For example, Accenture, one of the top players in this space, acquired Ariba’s sourcing and BPO services way back in 2010. In 2013, it further expanded its services by acquiring Procurian, another leading procurement services provider.

Service providers have also made small targeted acquisitions to develop niche capabilities. Before its acquisition by Accenture, Procurian had acquired Media IQ, a media auditing, measurement, and benchmarking company, and Utilities Analyses, Inc. (UAI), an energy management firm. In 2011, Infosys acquired an Australian-based strategic sourcing and category management services provider, Portland Group Pty Ltd. And in early 2016, Genpact, another strong player in the space, acquired Strategic Sourcing Excellence (SSE), a sourcing and procurement consulting firm.

The big question that follows is why other players have not made acquisitions in this space to strengthen their hold on the market. The answer is simple. There are not a lot of strategic sourcing and category management players with considerable scale. Denali falling out of the race means that the list further shortens. Each acquisition puts extra pressure on the remaining players to prioritize procurement and make a quick decision. So WNS’ acquisition of Denali could potentially be a starting point for some hectic market activity.

Have a question?

Please let us know how we can help you.

Contact us

Email us

How can we engage?

Please let us know how we can help you on your journey.