When Dr. Subhash Makhija co-founded GEP in 1999, along with Neha Desai Shah, Jagadish Turimella, and Roopa Gandhi, their initial vision was to use technology to streamline procurement processes.
Makhija had gained ample experience in sourcing, procurement and supply chain from his time as an executive in Accenture and, along with his co-founders, recognized the potential of technology to change procurement for the better. What they soon learned, however, was the industry itself was fairly early on in the technology adoption cycle.
As a result, Makhija and his co-founders pivoted GEP toward a broad blend of procurement consulting, procurement technology and procurement outsourcing. Fast forward 15 years, GEP’s market-leading sourcing and procurement software platform – SMART by GEP – is part of a comprehensive portfolio of procurement consulting, technology and outsourcing services.
Sourcing and procurement solutions – including spend analysis, strategic sourcing, category management, procurement strategy and organizational design, sourcing and procurement software, procurement operations and end-to-end procurement outsourcing – generate roughly 95% of GEP revenues.
Given his impact, it’s fitting that Makhija is the inaugural subject of our Procurement Influencer series on the future of the industry. We talked the history of procurement, current trends that can shift the needle, and GEP’s priorities for the future.
Andrew Bartolini: When you reflect back on the market 15 years ago as you were founding GEP and coming over from Accenture, what are some of the biggest changes you’ve seen?
Subhash Makhija: I started in procurement in the early 1990s and there was a very low level of automation at the time. We have seen quite a bit of process automation in the last 15 years, and while technology adoption has tended to lag, we’ve certainly seen significant progress. That said, there is still a long way to go.
Another big change is the growth of procurement outsourcing. When GEP started, the concept was relatively new. Back then, even in the IT space, many companies were just beginning to test outsourcing and offshoring at a reasonable degree of scale. Contrast that to what we see today, which is an increasing number of global companies seeking outsourced and hybrid solutions as fundamental to their operating models.
At the same time, I’ve also seen the procurement function role become much more strategic. The CPO for example — actually, I’m not sure that the term CPO was even in wide use in early 1990s — was not as prominent a role as it is now. Today, CPOs are more influential organizationally and have gone on to take on bigger responsibilities, becoming CFOs and even CEOs.
Of course, the pressure to reduce costs is a constant. If anything, it has only become more intense over the past 15 years.
AB: Let’s take a look into the future. What are the things you see on the horizon, either near-term or long-term, that have the potential to shift performance, results, or the way that procurement is operating today?
SM: In the procurement space, we were one of the first providers a global operating and delivery model, using emerging talent markets, such as India, way before Accenture and IBM. Procurement folks are not only more comfortable with global operating models, but increasingly prefer them.
A big trend that we’ve seen more recently, and I do believe we’ll continue to see, is enterprise procurement leaders looking for much more creative, more innovative work from procurement solution providers. Too many people still think of procurement as uninspired blocking and tackling – but, in truth, very creative work can and is being done. How do you leverage the entire supply base to innovate and achieve breakthrough value? How do you create help create competitive advantage? How do you help create greater business and enterprise value?
Hence the rise of the CPO [Publisher’s note: We agree, the CPO is Rising – cporising.com!] as we’ve seen and the increasing prominence of the entire procurement function.
Another big trend is within procurement technology. Most of the earlier generation of B2B tools – Ariba, SAP and others – did a decent job getting the ball rolling, but clearly we’re still not where we should be. At the same time, newer tools and technologies – smart phones, social media, the Cloud — are just beginning to touch down in the procurement and supply chain space.
Of course, in B2C, our daily life, we use these tools — Facebook, LinkedIn — but when it comes to B2B, we’re just seeing the tip of the iceberg. Approvals for workflows, contracts, auctions, bidding on an iPhone or iPad, looking at spend reports or having mobile information at your fingertips before a negotiation.
There’s so many different ways that we can leverage these mobile tools. And GEP has heavily invested in leveraging these technologies and we feel that this market will continue to grow rapidly. By some estimates, the use of mobile tools in the business world will range anywhere from 30% to 50% in the next three to four years.
Moreover, procurement is becoming much more global in perspective. For instance, we’re an increasing number of commodities, which used to be very local or regional, sourced and managed more globally. At many clients, we see country-level or regional-level procurement models shrinking and the center-led, globally integrated procurement teams are becoming more and more influential in managing spend and suppliers.
We also see a procurement getting involved in much more complex categories. Fifteen years ago, procurement’s involvement in things like marketing would be relatively low. The best procurement would do was issue POs and get services done and make sure the vendors were paid. Today, at many of our clients in the consumer products sector, procurement folks have an equal seat at the table. They get involved very early on in design phases, and in some cases, are influencing the decisions involving selection of marketing agencies or where to invest dollars.
We’re seeing that level of input in other complex categories too. CAPEX is another big area; we have a lot of big projects going on. (North American and European clients investing is countries like Malaysia, Thailand, China and India.) We see procurement people playing a major role in how new plants are set up and how vendors are selected. Which is again a relatively new role for procurement.
Another big, complex area is the IT space – and not just laptops and desktops. Procurement is getting involved in developing new apps and functionality, software, across the board as well as in the outsourcing space in selecting the strategic vendors to shape the future of the company.
AB: GEP has a broad solutions portfolio – given that, as you look out over the next couple of years, call it two to three years, where are you going to emphasize investment and what are some of your top priorities?
SM: Our business strategy is customer centric – which simply means that we have placed our client at the center of our business model. The needs of our customer – sourcing, procurement and supply chain professionals at market-leading global enterprises – determine the type, range and mix of our solutions, no matter what boundaries we cross. Consulting, outsourcing, technology, whatever it takes to make our clients successful by their own measure and that of their organization.
We do see a convergence of product and services in the delivery of complete solutions, perhaps because we are more open to convergence than other solutions providers. And in the market place, we see products looking more like services and services looking more like products. But, of course customers are most interested in an effective solution, not what we call that solution.
They have a problem, they’re looking to solve that problem, and they are very open to us bringing software and services, or whatever is needed, to the table in the most cost effective way and solve that problem. Same on the opportunity side of the ledger.
In that regard, we don’t see a big difference in the way companies consume software or services. It is not just SaaS anymore. Customers may come to us and want to pay for software on a per-use basis, similar to services. I think we have the right technology today to price it that way if and when our customers make that shift.
With this convergence, the discussion of a solutions roadmap – and the investment in multiple business lines such as software, consulting services or outsourcing services – is distinctly different at GEP, because we see all these elements as vital to creating the next level of value to our clients.
AB: Thank you, Subhash, for taking the time to speak with us today. For more information on GEP, visit their website at www.gep.com and look for the next installment of the Procurement Influencer series.
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