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Business Management Review | Thursday, February 10, 2022
Services account for about 50% of spend on third-party suppliers, ranging from 20 percent to 80 percent depending upon the industry and specific organization.
FREMONT, CA: Globally, businesses spend tens of trillions of dollars on services each year. The world is moving away from a goods-and-manufacturing-based economy toward one in which outcomes are delivered as a service — whether traditional labor, complex services (e.g., outsourcing, professional services), or even outsourcing goods production through contract manufacturers. Services account for nearly half of all spending on third-party suppliers, varying from 20 percent to 80 percent depending on industry and organization. There are potentially huge opportunities to cut the cost of services because of the significant overall expenditure and the scattered nature of services spending throughout the organization. Furthermore, in many firms, service expenditure control/authority is dispersed across functional units (e.g., legal, marketing, etc.) in practice, and procurement involvement can be minimized. This not only allows for cost reductions but also allows for better service outcomes by enhancing visibility into, rationalizing, and automating operations.
However, how to get these better results becomes the question of the hour. Procurement professionals have consistently told us that the processes and technology used to manage services are not as robust as those used to manage goods and materials, implying that there is much more work to obtain better visibility, influence, and control over service spend. Even though businesses spend tens of trillions of dollars on services each year, little research has been done on using technology to support their service procurement and management. To answer this and other related issues, Spend Matters and SIG conducted a poll of procurement practitioners. A portion of data in this Spend Matters PRO brief that refers to services spend influencers were focused upon. The study looks at the different viewpoints of respondents with high and low control over service spending, leveraging their differing pain points and approaches to this mega category to uncover applicable lessons for achieving greater service spend performance. It also examines the technologies that each group now employs to handle various sorts of service expenditures, as well as each group's overall satisfaction with their current toolkits.
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