Tag: analytics

Top Two Procurement Outsourcing Drivers: Cost Reduction, Analytics | Press Release

Procurement outsourcing market matures, with buyers seeking more value, more innovation, broader scope from service providers.

The global multi-process Procurement Outsourcing (PO) market witnessed decent growth of 10 percent in 2015, reaching US$2.3 billion in size, led by strong adoption by North American manufacturing, consumer packaged goods (CPG) and retail segments, according to new research from Everest Group.

PO buyers cite cost reduction and analytics support as their two most crucial needs. In response, service providers are increasingly adopting robotic process automation (RPA) to usher in a new round of cost savings in such areas as administering purchase orders, invoice processing, fraud/duplicate payment detection, claims processing, and conducting arrears review. Similarly, buyers are increasingly asking for analytics solutions because they enable savings and minimize financial and operational risks. Typically, buyers lack in-house analytics capabilities, tools and expertise, so they are increasingly looking to service providers to plug this gap. Buyers list analytics expertise as one of the top three service areas in which they would like to see improvement by their outsourcing partner.

Growth in the PO market can also be attributed to an emerging trend of buyers seeking more end-to-end coverage. PO contracts are moving towards multi-tower scope, with an increasing inclusion of finance and accounting, supply chain management and human resources outsourcing processes in addition to traditional procurement processes. 

“Organizations are seeking to transition to a cost+value model of procurement outsourcing, where the entire procurement function shifts from an operational role to a business enabler role,” said Megan Weis, vice president, Business Process Services, at Everest Group. “Service providers play a key role in this transformation effort by providing best-in-class process efficiencies, technology solutions, and supplier relationship management that collectively contribute value far beyond cost arbitrage to the organization. Value-added contributions include risk mitigation, market intelligence, supplier-led innovation and faster speed-to-market of finished products.”

Other key findings:

  • Both organic and inorganic factors contributed to the growth in 2015; however, the organic activity (renewals, scope expansion) was subdued while inorganic activity (new deals) remained strong.
  • Strong evidence of service provider switching was observed, with growing termination rates and a fall in contract renewals.
  • Contractual activity rebounded in traditional industries such as manufacturing, consumer packaged goods (CPG) and retail.
  • In 2015, market activity picked up in the Small and Medium Business (SMB) segment and the mid-market buyer segment.
  • Adoption remained strong in North America.
  • Increasing investment by service providers to enhance category expertise has resulted in buyers becoming more comfortable with outsourcing additional categories.
  • The top five players (Accenture, Capgemini, GEP, IBM and Infosys) together account for more than 70 percent of the PO market.
  • Accenture and IBM continue to lead the market in all geographies and in all major industry segments except healthcare and pharmaceuticals, where GEP commands the top position.

These results and other findings are explored in a recently published Everest Group report: “Procurement Outsourcing (PO) Annual Report – 2016 – Analytics and Beyond.” This report assists key stakeholders (buyers, service providers, and technology providers) in understanding the changing dynamics of the PO market and helps them identify the trends and outlook for 2016-2017. The report provides comprehensive coverage of the global PO market including detailed analysis of market size and growth, buyer adoption trends, PO value proposition, solution characteristics and service provider landscape.

Analytics Pose Competitive Advantage Questions for Service Providers | Sherpas in Blue Shirts

Analytics technology is like a three-legged stool. Its rests on three necessary components: talent (data scientists, analysts and project managers), tools (from Excel all the way to Watson) and data. The most powerful is data. Data yielded in analytics are incredibly valuable in addressing business problems. As I recently explained, that value can be extremely profitable for service providers. But when it comes to designing a significant competitive advantage for providers, analytics pose strategic questions.

Should a provider sell analytics as a pure, standalone service? Or should the provider sell analytics embedded into its other service markets? Or should it do both?

And there are additional questions to consider in making that decision:

  • If the provider sells pure analytics as a service, will it cannibalize its business?
  • Or does the provider even have a choice since, if it doesn’t do what the customer wants, another provider will grab that opportunity.
  • Will selling pure analytics instead of embedding it in other service offerings cause the provider to forego the opportunity to create differentiated services?

The issue at the core of whether or not to embed analytics in existing service offerings is the fact that the data service providers have access to is proprietary, owned by their clients. We’re seeing that increasingly clients recognize data value and are not willing to cede that value.

The Analytics Holy Grail

A service provider having the ability to use a client’s proprietary data in a broader context and therefore the base of a broader service business would be the Holy Grail in the analytics space. But how can providers achieve this outcome?

We at Everest Group have seen examples where the service provider creates a multi-tenant platform and provides the same or a similar service to multiple clients. The provider extracts the multiple clients’ data, combines it with broader industry data and embeds the analytics from that to provide an enriched service for the clients on that platform.

An example is a service provider that leverages proprietary transportation data from state and local government clients. The provider integrates those clients’ data into broader traffic data and gives back to those states and municipalities actionable insight that they use in reconfiguring road systems where there is an accident or delay.

Another example is analytics services derived from logistics systems of multiple tenants such as railroads, airlines or shipping businesses. Their data allows the provider to identify bottlenecks to the benefit of all. Healthcare analytics is another instance where it makes sense to sell analytics embedded in existing service offerings. Such an offering could compare patient data in large populations to extract information and patterns that allow for better patent treatment or clinical outcomes across a broad population.

Analytics technology is incredibly powerful and valuable, and service providers will enjoy profitability from this service, whether they sell pure analytics as a service or sell embedded analytics. But embedding clients’ proprietary analytics data into existing service offerings is the strategy for getting the Holy Grail.

“This Time it’s Different” are Dangerous Words | Sherpas in Blue Shirts

“This time is different” are often thought of as the most dangerous words on Wall Street. I’ve been in the outsourcing services industry since 1983 in the early days of outsourcing pioneer EDS. I watched the rise of the asset-intensive infrastructure space. Then I watched the rise of labor arbitrage and the enormous changes that brought to the industry. And now I’m watching the rise of automation, analytics, cognitive, and cloud bring a similar scale of disruption. I know from experience how “this time it’s different” is seductive to believe in the outsourcing industry.

In 1986 when I left EDS, its net return was 22.5 percent – very similar to the top labor arbitrage firms today. It was the height of the first wave of outsourcing. That continued to go on and the industry moved to large transactions and lower margins. That business peaked in the mid- 1990s. From 2000 on, labor arbitrage took over, and the industry went back to smaller transactions with high margins – very similar to the high margins that EDS achieved back in the 1960s and 1970s. Now we’re seeing the rise of the next S curve –automation, analytics, cognitive computing and cloud – and this space is rapidly growing and gaining share. Labor arbitrage is still growing, but it’s slowing, and profit margins are declining.

I’ve recently had private conversations with some industry executives who have been prophesying the death of labor arbitrage. Some leading executives believe the market is in for a massive shift over the next 18 months to five years in which the labor arbitrage space will be completely disintermediated. I think this is unlikely.

So is it different this time?

Like the asset-intensive space, I think the labor arbitrage space will be disintermediated. But just like in the asset-intensive space, which started in 1995-1996, here we are 20 years later, and we still have asset-intensive outsourcing. Yes, EDS was bought by HP and now is combined with CSC, and IBM is still in the game. There’s still a significant infrastructure market.

I expect 20 years from now that there will still be a meaningful market for labor arbitrage, but it won’t garner the same profits as today. And I expect the shift from labor arbitrage will be a slower move than 18 months to five years in terms of having a dramatic and drastic effect on existing workloads.

Having said that, I do expect the value will move to new areas – just as it did in the past as the market evolved. And we’re currently seeing this happen with automation and other digital technologies. Market capitalization and growth should be in the new models, just like it happened for EDS, HP, CSC and IBM.

Good news and bad news

I predict difficult years ahead for the arbitrage business but radical change to the current players. The only industry leader that successfully migrated to the labor arbitrage space from the asset-intensive space was IBM. Likewise, this time I don’t expect many existing arbitrage players to successfully migrate. We saw massive consolidation in the infrastructure space, and I expect to see consolidation in the labor arbitrage space too.

Yes, I understand this time it’s different in that minority shareholder laws in India will create more resistance to consolidation. But I think the change is an irresistible force meeting a little object. I believe that the industry will consolidate, growth will continue to slow and profit margins will come down, just like it happened in the asset-intensive infrastructure space.
At the same time, automation, analytics, cognitive and cloud technologies will shift the industry to new business models, different commercial relationships, different pricing structures, and different kinds of risk sharing – just like it happened when labor arbitrage entered the asset-intensive infrastructure space. The good news is that these new models will bring new providers into the services space. The bad news is I think these differences create a high barrier for incumbent providers when it comes to changing their offerings. So, once again, this time it won’t be different.

Using Advanced Analytics to Design Tomorrow’s Business | Virtual Roundtable

Wednesday, September 14, 2016 | 11:00 a.m. – 12:30 p.m. ET

request to attend dk blue

Enterprises today are using advanced analytics (predictive and prescriptive) better than ever before to understand their customers, markets, and regulatory environments. This groundwork is helping them to prepare their businesses today for tomorrow.

Participants will discuss their experiences in leveraging advanced analytics to tap into market and customer insights to prepare for the future, including how participants have structured their organizations – from the data, talent, and change management perspectives – to fully exploit the potential of analytics.

Who Should Attend
Global business leaders and executives wishing to understand how leading businesses are utilizing advanced analytics to prepare for the future.

What You Will Learn
This session will help participants gain a glimpse into the art-of-the-possible with advanced analytics solutions available today.

Please note that this event is for buyers only (no service providers).

Request to attend

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.