IBM Acquires Emptoris: Implications for BPO

The acquisition by IBM of Emptoris – a widely deployed procurement software solution that combines spend analytics, sourcing, contract management and other functionality – is big news in procurement circles. The move presents an opportunity for IBM to advance its technology solutions and procurement BPO businesses, and to tell a marketing story to open more doors within procurement organizations.  An article by our friends at SpendMatters has largely gotten it right in terms of opportunities and challenges, and it’s worth a read.

In terms of the larger picture, this acquisition clearly signals a further commitment to platform-based BPO, and that the combination follows Capgemini’s acquisition of IBX last year, as well as ICG Commerce’s much earlier internal repurposing of its software suite to use as an integral component of its procurement delivery model.  While to date the economics of pricing have been challenging, platform-based BPO solutions will likely become an increasingly dominant delivery model.  Here are four distinct advantages that Platform-Based BPO Solutions offer:

  • By optimizing its BPO process to a standardized technology offering, the service provider can in theory provide both greater process efficiency and improved resource utilization across multiple clients. As a result, the provider can support a higher transaction volume with fewer resources.
  • Because the underlying technology is provided with the service, no capital investment is required by the customer. Furthermore, the deployment of the same technology across multiple customers, supported by a leveraged technology team often located in a lower-cost market, should combine to reduce the service provider’s total cost of ownership. Some of these savings can be passed on to the customer.
  • A continuous feedback loop between the service delivery team and the technology team across multiple client engagements enables ongoing enhancements to the underlying technology. These can include new functionality and related applications geared toward enablement of continued positive business impact beyond cost savings.
  • Lastly, because the services are optimized to the platform from the beginning, the amount of time to achieve savings should be reduced.

IBM has emphasized that this acquisition is another key piece of its overall “Smarter Commerce” Strategy, and that the combination will enable IBM clients to better manage process visibility, tighter integration with an increasing number of trading partners, and rising transportation costs.  Interestingly, IBM is emphasizing that the combination will allow customers to analyze supplier performance, centralize contract lifecycle management, and develop global sourcing solutions with a “flexible choice of software and service, delivered in the cloud, on premise or in a hybrid model.”

To us this all sounds like a blurring of distinctions between technology solutions and BPO solutions, and a platform-based strategy provides an on-ramp to grow both offerings within each client without ever using the often polarizing “outsourcing” word. We believe that this wave will continue.

What do you think?