InPart 1of the series, we delved into why procurement should run itself as a services business, and inPart 2, we shared how procurement can learn from other types of professional services businesses to bring more rigor and value to its internal customers and even external customers. On this last point, organizations such as GE, IBM and others have been masterful at industrializing various services internally, and then using themselves as success stories to externalize those services to new customers. In doing this, they are trying to establish themselves as digital platforms that will be the underlying architecture of emerging digital value chains.
So, what does this have to do with procurement? Many things:
- As we discussed in Part 2, procurement and other stakeholders must understand how supply markets are fundamentally shifting as this digital transformation occurs. Such disruption is not just the “Amazoning” or “Ubering” of the supply chain, but services, too. For example, consider the mind-blowing transformation that Infosys is embarking on with its Mana platform and its Zero Distance approach to innovating service delivery.
- Procurement can use this trend to its advantage to bring some leverage to relationships with large incumbent providers that may be threatened. This is also a great time to be a “customer of choice” and use strategic supplier management to capture innovation from your incumbent suppliers while also testing out emergingdigital services providers.
- It’s also critical to understand the implications of signing up on someone else’s platform and what that means to switching costs down the road, as well as to what extend today’s suppliers don’t become tomorrow’s competitors.
- Finally, if your company is going through a digital transformation to execute a new digital business strategy where your firm may also be positioning as a “platform,” then it’s important to understand platform-based business models and also cloud-based architectures (i.e., an XaaS model that lets you deliver these services scalably over the web) to more easily plug and play supplier XaaS services (seeIBM cloud reference architectureas an example) into your procurement services.
The IBM architecture diagram can be a little overwhelming, so, let me show you a slightly simpler procurement version of this “aaS” architecture and give some examples of some innovative services. Actually, it’s not simple either, but it’s as simple as it can be while explaining the fundamental design of the PRaaS model in one diagram.