“When we start thinking about and putting the end customer at the center of everything we do, it changes our perception of what’s important and therefore what we measure in the outputs from our contracts.” Gordon Donovan, Vice President Research - Procurement & External Workforce, SAP
Services spend represents a significant portion of procurement’s responsibility, yet many organizations still struggle to manage it as effectively – and strategically – as they could.
To help procurement teams better understand the opportunities at hand to elevate and mature their services spend management strategies, we recently partnered with SAP to update research that was started back in 2023. We surveyed a wide swath of procurement leaders who manage services spend, uncovering critical gaps (and some silver linings) that make services spend ripe for improvement.
In a recent Art of Procurement webinar, Kelly Barner spoke with Gordon Donovan, Vice President Research - Procurement & External Workforce, SAP, about the findings and recommendations that surfaced from this new research. We are glad to share the audio from that event in this week’s podcast.
While the research revealed that procurement’s confidence levels are rising, there are still important deficits in strategic aspects of services spend management, including performance measurement, business and stakeholder alignment, and the journey to maturity.
Here, in Gordon’s own words, are some key highlights from their conversation:
Value Beyond Cost Savings is the Future
“I think from a procurement perspective, there's still opportunities for us to be more impactful. And those are things –the value beyond savings – those are the risk reductions. My old procurement teacher from 1980 said to me, the first obligation of procurement professionals is to ensure supply continuity, make sure you keep getting what you get.
Everything else is all serving that same kind of problem. So I think that is important – thinking about the value beyond savings.”
Customer as Central to Procurement’s Strategy
“It's tempting for us to think about our customers as being our internal stakeholders. And undoubtedly, they are part of it. But again, I think if we get to this value beyond savings, one of the things that I see and I read a lot is to recognise the actual end customer of your organisation. So if you want to be fully aligned with your organisation, thinking about the end customer that your organisation serves, and putting them central to your procurement strategy.”
KPIS Should Reflect Customer Centricity
“I think it's also important to think about how organizations manage contracts and what they put for the KPIs and the SLAs. They need to also think about how to bring their end customer satisfaction into some of those KPIs. Because again, when we think about how aligned we are with the business, it has to be aligned with our end customer as well, because everybody talks about customer centricity. You know, the customer is at the center of everything that we do, and we need to think that way too.”
The Power Balance With Suppliers Is Shifting
“The supplier centricity and the supplier relationship is going to increase. You need to become a customer of choice because when you've got scarcity of supply, you need to ensure that the supplier wants to supply to you. So just ask yourself the question, what would make you want to do something for somebody else? There has to be something in it for you.”
“You first of all have to make a strategic decision that says, is the outcome of this contract around saving money? Or is it about something else? And I think the minute we have those types of conversations, the maturity level increases massively because it's a different conversation. And trust me, the business is wanting us to have those conversations with them. They're wanting to be challenged. They're wanting to have that discussion around insource, outsource. Those are the types of things where, I think, ‘that’s where the fun is.’”
Actions Speak Louder than KPIs
“You're sending a signal to the suppliers as to what's important to you and what's not important to you. I was having this conversation with somebody the other day and they were saying, oh, they've missed this, they've missed this. What have we done with it? Well, we haven't really done anything with it. Well, then the message that you've basically said is you don't care about the thing that's being missed.”
Success Brings Rewards and More Responsibility
“I think procurement has been keeping its promises. I think that's a good thing, and as that confidence level rises up, that has two knock-on effects. One, it means that when we want to do different things, we want to transform and we want to invest in technology, then because we've been delivering, we get that budget. The second one, and the listeners on the line can decide if this is a good or a bad thing, it means that we get more stuff to do.”
