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Technology and Offshoring – Two Integral Parts of Procurement

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Over the last few years, procurement has evolved and progressively moved away from being a transactional service into being an integral part to any business strategy. Moreover, there has been an increased focus recently on creating a multi-location solution or even offshoring procurement. In addition to this, changes in regulations within the financial services market meant tighter processes, governance and supplier risk. As organisations try to stay on the right side of the regulators, and maintain control over their third party spend, category management seems to have taken a backwards step within the procurement world in favour of process and compliance.

 

The financial services industry is concentrating more on the core business as well as on becoming operationally efficient and, therefore, offshoring parts of the procurement team certainly appears to be on most people’s radar. Current technologies used in procurement give businesses more transparency over the procure-to-pay process and therefore offshoring this level of role can be successful. Also, video conferencing technologies give organisations opportunities to look at agile working. Facetime, Skype, Yammer and remote desktop working are all easily available and facilitate this.

 

As for the strategic sourcing managers, they need to provide commercial advantage within the market place and the business. Most of the time, they are based in a company’s HQ and work as closely as possible with stakeholders.

 

I wonder if moving these key people into a satellite office will affect their strategic advantage with stakeholders and suppliers? I have seen many iterations of this type of offshoring strategy in banking. Barclays centralised their global sourcing and supplier management team in Singapore, whilst HSBC are moving their retail banking operations team to Birmingham. Citi moved the majority of their European team to Budapest and RBS are currently going through the process of moving their supply chain team across 3 different UK locations. Deutsche Bank have had a small team based out of Birmingham for some time and finally, the American Investment banks have led global strategies for a number of years with stakeholders based in a number of high cost locations.

 

Offshoring seems to be working for the banks mentioned above but finding the right talent has always been challenging and for a growing industry like procurement, finding it is key. We must remember that the reputation of procurement has progressed as a result of a new breed of professionals who are experts in what they do and are often strategic and commercial thinkers. Those functions that remain tactical, often don’t pack the same punch. Offshoring, is therefore a risky solution. It can indeed lower head-count costs however, there are some important factors like time-zone, economic and political stability, supply chain infrastructure, language and cultural differences which need to be taken into consideration before offshoring a successful procurement function and expecting to get the same results and quality. There are, of course, some very talented professionals outside of London however, the level of pay keeps drawing many individuals to the capital making London one of the biggest talent pools in the world.

 

Nevertheless, people have mixed views on offshoring procurement as its success depends on the level of offshore or location strategy. The view from a Head of Transition and Change on outsourcing within a financial services industry is the following: “The biggest impact I can see affecting locations and technology for BPO is the introduction of Robotic Process Automation. For process’s that are simple repetitive and based on clear rules defined in the operating procedures software programs can now be written to execute these tasks taking out human intervention. This has an impact reducing cost significantly, making the location less relevant for the Outsourcing provider and should improve quality of the output as human error is removed from the process. Although the introduction of this technology is in its early stages it is easy to see how as the technology develops it could really disrupt the current BPO model and early adopters from the procurement (buy) side could see significant savings achieved.”

 

Another view from a head of HR category at a financial services organisation suggest that: “If interest rates do not go up and they are not looking likely to do, then large financial services organisations will be taking further measures to do more BPO/ITO to drive the cost saving initiatives.”

 

Also, although Brexit has not affected the market yet, (and personally I feel the role of a procurement professional will become more crucial) it could certainly have an impact on where and if organisations offshore or, whether the UK will remain a viable option to house procurement capability. Parts of Europe remain strong contenders for offshoring however, the level of talent in certain locations feels of a higher standard than in other popular offshoring destinations.

 

In conclusion, technology and offshoring are going to be two integral parts of our industry, and a trend that will help the procurement world to continue to evolve. Procurement does, however need to remain consistent if the industry is to grow as a valued business unit and not a back office function. To be a truly strategic function having face-to-face visibility with stakeholders and suppliers is vital to the success moving forwards.

Ross Cooper
Posted by Ross Cooper
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