Procurement outsourcing needs leaders

Thames Water’s £2.5bn procurement outsourcing deal with Efficio isn’t just significant for its size – it’s also notable for the boldness with which the UK water company has embraced the concept.

One of the more common objections to the potential that procurement outsourcing has to offer is that it prevents the function for acting in a more strategic way. If you’re outsourcing the work, the opportunities to develop leaders and to identify opportunities to contribute to the business from a strategic standpoint are being lost, so the argument goes.

Which is one of the reasons why Thames Water is worth further investigation; the company isn’t new to outsourcing capability and has adapted itself over the years to try and use the process as a way to create a more agile procurement service – for example, it outsourced all its procurement in the mid 90s before bringing it back in house some seven years later.

Its head of supply chain, Ian Bolger has some interesting views on procurement outsourcing and when I found about this announcement, I was taken back to striking comments he made at a roundtable last year that Procurement Leaders hosted with Capgemini Procurement Services.

“I see it more as an in-sourcing of expertise rather than outsourcing,” he said. “So it’s about injecting scale, talent and agility and wrapping consultancy ‘on-tap’ around that.”

The impression I got was that for Bolger, the argument that procurement outsourcing isn’t easily measurable and closes doors to strategic activity doesn’t wash. It’s a service and once you’ve understood its limitations, it’s up to you to make the most from it.

“In my experience having a rigorous sourcing methodology will only get you so far. You need the intellectual rigour, interpersonal skills and the category knowledge to really engage with the business and drive ‘game-changing’ shifts in value,” he said.

“However, it is often the case that outsourcing can access theses skills in a targeted way to drive rapid and sustainable change.”

It seems that effective procurement outsourcing needs leaders. It’s not a perfect process, and it’s still one that a lot of companies regard with much distrust, but one of the key success factors is strong leadership – executives that are prepared to engage with, understand, develop and adapt their relationship with a procurement outsourcing provider to turn the process into a strategic tool.

Often CPOs point at the procurement outsourcing market and say that it’s not ready yet to meet their needs. Perhaps they’re right, but it’s hard to ignore the value that some of today’s leaders are getting out of the process.