Source-to-Contract (S2C) Outsourcing – Significant Value Potential but Challenging to Implement

INTRODUCTION

Source-to-Contract (S2C) represents the upstream and judgment-intensive process within the Source-to-Pay (S2P) process. Adoption of S2C outsourcing for non-core spend is rising given the significant bottom line impact potential it can create through spend reduction and increased compliance. However, outsourcing S2C is also more challenging to implement given the fundamental difference in its underlying cost base compared to most other BPO segments (procurement spend versus operational costs).

In this study, we focus on S2C outsourcing segment to analyze the following:

• The value proposition of S2C outsourcing and the underlying drivers and challenges
• Size, growth, and adoption trends in S2C outsourcing
• Typical scope and solutions observed in S2C outsourcing
• S2C outsourcing service provider landscape

Scope of analysis

• The scope of this study includes outsourcing contracts that include S2C activities in-scope. Such contracts can broadly be classified into two groups:
• S2C-focused contracts that do not have transactional P2P activities in scope
• End-to-end S2P contracts that include both S2C and P2P activities in scope
• Outsourcing contracts that are primarily focused on P2P activities are not included in this assessment
• The study is based on over 550 S2C-focused and S2P contracts signed as of 2012 and the operational capability of over 20 service providers including Accenture, Aquanima, Capgemini Corbus, DSSI, Genpact, GEP, HCL, HCMWorks, HP, IBM, Infosys, Optimum Procurement, Procurian, Proxima, TCS, Wipro, WNS, Xchanging, and Xerox

CONTENT

This report focuses on the S2C outsourcing segment within broader PO, which covers end-to-end S2P. The report analyzes the value proposition and the underlying drivers and challenges, size and growth, adoption trends, solution characteristics, and service provider landscape for S2C outsourcing.

Some of the findings in this report are:

• The cost base of S2C outsourcing is different and larger than other BPO segments
• Even a moderate savings target on such a large cost base translates into significant bottom line impact potential
• However, the unique and large cost base also renders the implementation of S2C outsourcing more challenging
• S2C outsourcing is the fastest growing PO segment
• Most service providers partner with commercial off-the-shelf (COTS) technology vendors to augment client’s existing technology landscape. Platform-based S2C contracts are also increasing
• Accenture, IBM, GEP, Xchanging, and Procurian are the top five service providers from a global S2C outsourcing market share perspective