Category Management:  Get the Most Out of Your Professional Services Spend!

One of the best kept secrets in Category Management is the tremendous opportunity to add value in Professional Services spend.  I’m not referring to developing rate cards, reducing the number of suppliers, managing demand or establishing strategic alliances but rather looking at all the hidden opportunities in “managing” that spend.  Companies spend millions (maybe billions) of dollars every year bringing in outside experts (professional services spend).  Whether it is contract IT professionals, accountants, engineers or strategy consultants doing “category management”, I question whether we are extracting sustainable value from these resources?   

Here is a simple model to consider:  

Like most categories, strategic sourcing is the easy part so I’m not going to waste my word count on that phase.   In many cases, there is little to no discipline in the “Definition, Review & Approval” phase.  Here are a few suggestions:

• Develop methods / policies to effectively determine when professional services resources are required
• Ensure the “work” is defined and the need for outside professional services is justified
• Review and approve all “work” exceeding defined thresholds prior to committing funds
• Aggregate demand – this happens seldom, if at all for professional services
• Reduce overall usage – look to optimize internal resources (perform vs. buy)

You may look at this list and assume that this is not part of your role or scope BUT it is.  The Category Manager needs to understand the strategic objectives and value drivers of the business owners to develop a holistic strategy that considers more than how to go to the supply market. You may recommend hiring all internal resources and NEVER go to the supply market – that is one possible solution and very much within the purview of your role.   

There is even less attention paid to the “Provider Management” phase and this is where most of the value is hidden.  Here are a few suggestions:

• Assign relationship managers to key providers
• Maintain a cross-organization view of the category to leverage provider skill and experience
• Work closely with BU partners / stakeholders to continually meet / exceed their desired outcomes
• Establish mutual KPIs with providers
• Work closely with supply base to bring innovation and improvements to the business
• Act as liaison between BUs and suppliers to extract value beyond the contract
• Train BU leads to effectively manage providers
• EXPECT AND DEMAND that all outside professional resources are required to transfer their skill and knowledge to your staff AND even mentor your junior people

I recently read an article in HBR entitled “Bring in Outside Experts to Mentor your Team”.  My first thought was – we don’t need to bring anyone in, they are already here J!  As noted in the article, we have expert outside resources in-house that we are paying for but seldom take advantage of that knowledge by insisting that they coach / mentor our own staff to increase / enhance our internal competency.  As a Category Manager, it is our job to look for ways to get the most from our providers.  This can go much beyond coaching to include introduction of innovation, new product / market entry, etc.  which can benefit both organizations.  If we think beyond just getting the best price in the market (Strategic Sourcing) there is a world of opportunity /value we can explore and capitalize on (Category Management).

Join in the conversation and let us know what think . . . . . . . . .