Should Procurement Fear or Embrace Procurement-as-a-Service?

I recently had the opportunity to interview Phillip Ideson, the founder of ProcureChange, a new Procurement-as-a-Service (PaaS) provider. You can listen to the entire interview on BMP Radio.

My first reaction to PaaS – one that I think is quite natural – is concern about what it will mean for today’s procurement practitioners if it catches on. Will we be outsourced the same way we have outsourced so many other formerly in-house capabilities?

As it turns out, however, the news is better than I expected. PaaS, far from being a threat to procurement, may be one way for us to achieve the strategic status we crave.

Some responsibilities will always be owned by in house procurement.

Despite the advantages of having flexible access to additional resources, you can’t outsource it all. According to Ideson, responsibility for fostering supplier relationships and carrying out change management plans has to reside in house. The degree of separation that in some cases creates an advantage for a third party provider will prevent them from being completely successful in making meaningful change and in building long term relationships.

PaaS may open the door to in house procurement in smaller companies.

I asked Ideson about the common entry point for the PaaS business case: is it procurement, finance, operations, the CEO? His response was that it depends upon the size of the organization. In companies with $1-5Bn in annual revenue, the demand tends to come from the executive team because there isn’t always a strategic procurement team in place. Over time, they may come to realize how much more control they would have over their spend if the team was in house.

It all depends on how you segment procurement’s responsibilities.

Several times during our conversation, Ideson made the point that subject matter experts will do better in the long run over generalists. I assumed he meant category expertise (marketing, logistics, services), but he was actually talking about process expertise: sourcing, project management, analysis. It is a scary thought, but many strategic sourcing projects are more tactical than we’d like to think. If we had a few extra hands at our disposal for the execution portions of sourcing, we could focus on strategy development and negotiation.

Whether you’re ready to give PaaS a try or not, it is part of a growing trend for companies to meet their procurement needs through alternate means. At the very least, procurement practitioners need to understand what it really means, and whether there is an opportunity to leverage it to their own advantage.

Listen to my full conversation with Ideson to hear more on the above topics as well as:

• The trend behind PaaS that is also good news for procurement practitioners.
• How PaaS can lead to a shift in the power balance between buyers and suppliers.
• What you can be doing today to prepare for the ‘Procurement Revolution’ that is to come.