Outsource Magazine Issue 24 - (Page 88)
Never the twaiN?
Procurement? Sourcing? Outsourcing? A confused procurement person writes…
Peter Smith, Spend Matters UK/Europe Peter Smith is Editor of Spend Matters UK / Europe, and an ex-Procurement Director in the public and private sectors. He was CIPS President in 2003 and his first co-authored book, Buying Professional Services, was published last year.
was delighted to be asked to write for this fine magazine, but felt guilty as I haven’t been a regular reader until recently. That’s perhaps due in part to confusion around terminology, and some perceived barriers between procurement professionals and the outsourcing community. And I have always considered myself a ‘procurement’ person – 25 years as a practitioner, consultant, CIPS President, and analyst. But actually, I’ve spent a large proportion of that time engaged in ‘outsourcing’ activities. So why is there confusion – and at times artificial barriers – between procurement and outsourcing? Is it partly terminology? Do we only call something ‘outsourcing’ if previously it was carried out internally in the organisation? Or does outsourcing apply to any activity that could conceivably be carried out in-house even if it has never been delivered in that way? My first experience of the topic was back in the 1980s, when I outsourced the manufacturing of Easter Eggs for the Mars group. But they were never manufactured internally; this was a new venture. But I guess we thought of it as ‘outsourcing’.
If we accept the definition that covers any service that could be done internally, then that leads to the conclusion that the vast majority of services an organisation buys could be considered outsourcing activities. While it is hard to imagine that any organisation would want to deliver all services internally, including those as varied as cleaning or management consulting, in most cases it would be possible to do so. However, there are still a few services where outsourcing cannot realistically apply. The idea of an organisation insourcing provision of airline transport services, or international courier business, is probably a little on the far-fetched side! But, even leaving these aside, that means we’ve brought a huge range of services into the scope of ‘outsourcing’. If we include direct-spend areas that we may not think of as services – sub-assembly work in the manufacturing environment for example – it’s clear that for most organisations, a high proportion of what they buy from third parties could be considered ‘outsourcing’. The overlap therefore between that discipline and what might be termed more conventional procurement (or at least what
I’ve always thought of as procurement), is very considerable. Hence my interest in writing for a magazine called “Outsource”, and in helping to break down some perceived barriers between different functional groups. Let’s move on to these barriers: why do we see considerable tension at times between executives who consider themselves to be outsourcing specialists, and more traditional procurement executives? There have even been calls from ‘sourcing’ professionals to “keep the traditional procurement people out of major outsourcing transactions” because they negatively affect the process. There appear to be a number of factors coming into play here. Starting with perceptions, those involved in major outsourcing transactions – whether as the functional expert, or as what we’ll call the transaction manager – may have a particular view of procurement. And often that is not a flattering picture! In much of the public sector and indeed many private organisations, the procurement executive is seen as process-driven, not attuned to wider business objectives, slow-moving
“Global procurement will be key to improving the customer experience around the world through better merchandise and lower prices.” – Lee Scott
Table of Contents for the Digital Edition of Outsource Magazine Issue 24
News & comments
Seeing through the cloud
Embracing a lean culture in recruitment
The roar of the crowd
Andrew De Cleyn
Greening the chain
Ten ways to shake your world
Roundtable: an excellent process
The talent question
Transition and change
Never the twain
Setting the standard
The legal view
The last word
Outsource Magazine Issue 24