Procurement services firms come in a variety of shapes and sizes. Most commonly though, providers of end to end procurement services are broadly sorted into two categories; the large generalists or “multi-tower” firms, and the more niche “best-of-breed” providers. Each have their own set of competitive advantages; multi-tower providers, typically larger enterprises, have powerful brands and deliver services across multiple business processes, while the much smaller-sized specialists tend to be nimble domain experts.
When businesses look to outsource procurement, multi-tower firms usually get the nod simply by virtue of being globally recognized corporations. But when it comes to strategic procurement engagements, is bigger always better? Does scale really matter? And can brand equity deliver better performance?
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Theoretical vs. Actual Outcomes With Multi-Tier Procurement Services Firms
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Perceived Value Proposition |
Actual Impact Based on Market Experiences |
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Business consolidation with a single partner results in a lower rate card |
Because procurement services engagements require limited staffing, rate card economies of scale tend to be less than expected — making specialist providers competitive even when compared with large aggregated deals |
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A single point of contact bearing responsibility for all services leads to more streamlined vendor management and better governance |
Different reporting structures for multiple service lines — each with varying goals and few significant incentives to collaborate — leave account reps navigating the politics of numerous chains of command, negatively impacting their responsiveness |
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Leveraging the large volume of spend under management through the service provider |
On most occasions, expertise and client intimacy tend to eclipse any supposed market-mover advantage |
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Global support owing to the presence of local talent, market knowledge and language capability even in small countries |
Ground resources in smaller countries seldom make the team as their cost doesn’t justify the spend at those locations |
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Process synergies across procurement, finance and IT drive greater efficiency and optimization |
Cross-functional process synergies often fail to materialize significantly due to varying reporting structures and disparate objectives |
The Best-of-Breed Edge
Smaller procurement services companies may not boast iconic names. But what they lack in terms of branding, they more than make up for in pertinent experience, specialized skillsets, and the very top echelon of available procurement talent.
Core procurement expertise is better understood and highly valued at a best-of-breed procurement services provider, making it an appealing destination for the industry’s top professionals. In addition, shorter reporting structures — with closer attention and greater involvement of executive management — mean better responsiveness, quicker execution, unmatched client intimacy, and a real likelihood of higher output.
For these reasons, a best-of-breed firm can often achieve a far greater level of strategic alignment with their clientele than a generalist.
Choosing Wisely — What to Really Look For
Plainly put, finding the best fit procurement services partner for your organization should be the primary objective; whether they are modestly staffed specialists or generalists with a global workforce numbering in the thousands is a secondary matter. What’s really critical is understanding the individual capabilities of each vendor, the delivery options they offer, and most importantly, the talent that they will bring to your operation.
