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Analysis: Dealing with IBM is like dealing with the army
"Dealing with IBM is like dealing with the army. It's approach is 'this is the way it's done.'" A client of IBM's procurement outsourcing strategy relayed this to Forester Research analyst Duncan Jones, when describing his experience with the business.
IBM does get the job done, in the defined time, at the agreed cost, but if you're looking for flexibility and creativity from your outsourcing partner its questionable if IBM's approach is what you're after. Or even if you can achieve the level of savings that are possible.
The army quote was given after IBM had revealed the revamp of its procurement outsourcing services in the summer. Revamp or not, certain things were business as usual.
The strategy tweak was, in part, to start dividing up the company's procurement outsourcing offerings and allow potential customers to try small pieces of the process, rather than full-on commit to a full-blown outsourcing project.
Bill Schaefer, IBM's vice president of procurement services, said he was hoping the company could change market perceptions that it was end-to-end business only. He says IBM will come in on a focused basis, but the expectation is that it will make sure it charges for this flexibility.
And Jones, a principal analyst covering sourcing and vendor management, doubts there will be a mindset of trying different approaches to achieve savings. He anticipates just the effective delivery of the IBM processes.
Jones says he doesn't think IBM is innovative in the procurement outsourcing space, and is damning of all players in general. "The providers aren't good at using technology effectively. There isn't the same incentive and drive as if you're running the department yourself."
Using technology to reduce the disconnect between procurement, finance, and operations is where Jones sees the real opportunities in procurement savings. But for IBM, the story is of economies of scale, leveraging purchasing volume, labour arbitrage, and a team that manages $48 billion of spend annually. IBM's deals are typically 5 to 7 year contracts, contractually tied to business outcomes.
However, beyond that, it's new capabilities include "providing spend-category experts who can analyse business' spend, develop new sourcing strategies and negotiate improved contracts with suppliers."
And with its new procure-to-pay (P2P) services, it sees them as for companies that prefer to retain sourcing responsibilities in-house, but using IBM to manage transactional activities. This may also involve taking over the management of existing in-house procurement technology, or bringing in an IBM partner for a hosted eProcurement solution.
Schaefer describes P2P as being about driving efficiency and control over the process, and that IBM has built a global infrastructure to support it.
But if your procurement processes are dysfunctional, you can't throw some, or all, of them over the wall in an outsourcing deal and expect it to work. "You'll achieve a fraction of the savings you could do if you sorted out the problems," says Jones. "The focus should be on getting closer to suppliers through EDI, portals, and handling invoice status, not moving people several thousand miles away."
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