Procurement consulting: a crucible of change?

By Fiona Czerniawksa

Procurement is something of a dirty word for many consulting firms.  Procurement is what gets in the way of client relationships; it introduced bureaucracy and brings down prices.  (And, of course, such criticism is ironic: consultants helped pioneer the introduction of more formal and rigorous purchasing methods into organisations so shouldn’t have been surprised when the weapons they provided were turned back on them.)

All that’s ancient history: the role of in-house procurement teams may be changing, but it’s unlikely to disappear; consulting firms have adapted, albeit reluctantly, to the new regime.  Procurement consulting is an entirely matter, however, and warrants a reappraisal.  Indeed, it’s possible that some of the changes we’re seeing here are the precursors of change elsewhere in consulting.

The first thing that strikes you about the procurement consulting market is how many mid-sized firms there are.  True, BrainNet was recently acquired by KPMG, but you still have Proxima, Efficio, State of Flux and many more – all bucking the notion that you either have to be big and broad, or small and specialist to thrive in consulting.

But why here and why now?  One reason has to be the nature of the work: in an era when clients are looking for measurable value from consultants, procurement consulting stands head and shoulders above most other services.  It’s not just that the savings are clear, but also where they’ve come from (lower prices negotiated in a specific category of expenditure) and who’s responsible (the negotiating team).  By comparison, working out whose responsible for delivering the savings from operational improvement work can get bogged down in debates over who (client or consultant) has done what.

But another factor has to be the rapid turnover of procurement people and their position within the wider organisation.  Procurement people are often resented by their internal customers as much as by suppliers, and for similar reasons.  Despite the efforts of some, most are still seen as the harbingers of problems and processes, getting in the way and slowing things down, when people just want to get on and get things done.  Procurement is a central, ‘staff’ function, sitting alongside, above or on the margins of the main business, in much the same way that some HR and IT departments are.  It follows that staff turnover in procurement is high (as it often is in HR and IT); people are passing through, going from organisation to organisation, rather than working their way up the career ladder in one place.  Indeed, one of many ironies here is that many procurement people are not permanent staff, but contractors, interim managers and freelance consultants, blurring the boundary between permanent and temporary staff.  Exploiting this situation, most procurement consultancies combine high-end, short-term consulting with long-term staff augmentation – and this another reasons why they’ve grown.  Some go further, outsourcing all or part of the procurement function; others have software which does part of the job.

I’ve written before about the intriguing space between consulting, outsourcing and interim management, and procurement consulting seems an example of just that.  Flexibility about the way services are delivered, tied to measurable results, has created the equivalent of an oxygen-rich environment in which small firms can grow bigger than they would normally do.  Bigger firms might want to watch this space to see what at least part of the future looks like.