Outsourcing procurement – Call me old fashioned but…

Outsourcing procurement – Call me old fashioned but…

Posted by Ian Burdon in Procurement Best Practices 14 Sep 2012

News of the legal tiff between Somerset County Council and the IBM led Southwest One Consortium set me wondering once again about the outsourcing of Procurement. Specifically, why would you want to do it?

Outsourcing of procurement in one form or another is not new. Strategic IT partnerships between pubic bodies and ICT providers, for example, have a history that is decidedly mixed, although the difficulties tend not to be made public by either “partner”. At least one such partnership was to my knowledge originally promoted in part as a nifty wheeze to get round those pesky public procurement rules and another seemed to me on at least one occasion to sail very close to the wind indeed in terms of propriety and legality of decision making.

Purchasing Insight logoThat isn’t the main thing I wondered about, though, and neither was it the depressing familiarity of the Somerset situation apparently being about “savings” promised and “savings” actually delivered. No, what interests me most is the idea that procurement is something which can appropriately be outsourced at all, the idea that procurement is a non-core function. This seems to me only to be sustainable if one holds a trivially mechanistic understanding of procurement. This limited view is that procurement is simply a process which can safely be decoupled from the rest of the business.

That view, together with the focus on savings, also seems to underlie the notion that procurement – and by extension e-procurement – is essentially all about ‘spend management’ or ‘spend optimisation’ and we end up with an unhealthy brew of the mechanistic and the reductionist.

Call me old fashioned, but it seems to me that procurement is neither mechanistic nor reducible to the simple management of expenditure, important though that is. My view is that procurement is intimately tied to the delivery of organisational goals and is therefore sui generis a core function.

Now it is true that for some routine or common commodities the most appropriate way of sourcing them may well be to tap into arrangements put in place by a third party such as a purchasing consortium even if you think that the prices might not be optimum (and in reality there is often a macho quality about buyers which means that they can’t see a contract without vowing to beat it, however much it costs so to do). But when it comes to the uninterrupted supply of goods and services which are crucial to the strategic success of your enterprise – i.e. the true meaning of “strategic sourcing”- why would you want to hand it over to a third party?

Put that another way, if you feel you have to put in place a long term deal for someone else to do something so intimately connected with your success, what does that tell you about your organisation?

Procurement is not about buying things, it is about the creation, management and dissolution of relationships between buyer and supplier. Outsourcing interposes a third party into those relationships and therefore runs a serious risk of being, along with e-auctions, a paradigmatic example of counter-strategic sourcing.

Ian Burdon can be found on twitter @IanBurdon

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