Genpact: A Procurement BPO Provider Swims Upstream

Genpact (Ticker: G), the business process outsourcing (“BPO”) firm, has a long history as a procurement outsourcing provider. Today’s article highlights my recent conversation with Jonathan Kirby, the SVP and Practice Leader of Genpact’s Source-to-Pay (“S2P”) services. Industry veterans may recognize the name since Jon is a former CPO bringing to bear 25 years of procurement and IT experience — notably as the Chief Procurement Officer of Barclays and then AstraZeneca — which is when I first met him. He then became a “CPO on the Rise” (remember this series which began by highlighting a few CPOs who had moved into other, broader roles?) and was appointed CIO of AstraZeneca.

From Back-Office to End-to-End

Genpact is a major, full-service business process outsourcing and services company that began almost twenty years ago as an outgrowth of an internal outsourcing pilot program at GE Capital.  It is now a massive operation with 70,000 employees located in 25 countries around the world.

With 2,700 staffers, procurement outsourcing (now called Source-to-Pay Services) is one small part of this company’s broad slate of process- and industry-focused services. To get a sense of its procurement services, Genpact reports that it has 50 procurement customers and currently manages $50 Billion in spend and processes 7.5 million POs and 40 million invoices each year. Genpact, like most BPO providers in the procurement industry began its work with a focus on the operational procurement or downstream part of the process, including accounts payable activities. When it came to full BPO procurement deals, Genpact would partner with a firm that could cover the strategic sourcing or upstream portion of the overall process. When its longtime and most-frequent partner, Procurian, was acquired by a direct competitor (Accenture) in late 2013, Genpact was forced to consider a new strategy if it wanted to compete in the full-BPO deals. And earlier this year, it completed the acquisition of Strategic Sourcing Excellence (“SSE”), a boutique procurement consulting firm that, as its name indicates, specialized in strategic sourcing.

Bringing SSE into the fold added in-house capabilities like strategic sourcing and category management that the company previously leveraged primarily through partnerships. Interestingly, SSE’s entire leadership team has extensive experience — around 20 years or more —  as procurement practitioners, which Kirby believes gives his team a unique perspective.

Today, the company now boasts a full-service offering that allows it to offer end-to-end procurement services including downstream, upstream, and strategic/department management (Genpact refers to these areas as the back-middle-, and front-office operations). These services run the full gamut of procurement department operations and extend well beyond Genpact’s traditional P2P processing, including areas like third-party risk management, master data management, category management, market intelligence as well as the traditional source-to-pay sub-processes. Jon said each of these services could be provided on an outsourced, consulting, or managed services basis depending on client needs and that the team is able either use its customers current solutions or leverage its own preferred “technology stack” of third-party solutions technology which include applications from Ariba, Coupa, Determine (“Iasta”), and Zycus. Genpact has also developed some proprietary solutions that complement its source-to-pay operation.

Jon also noted that Genpact could provide any of its services on a utility basis. Third-party risk management is a prime example of this; Jon said that Genpact has a database of more than 50,000 suppliers that have been vetted through Genpact’s risk mitigation process. Clients that use Genpact’s third-party risk management tool, which is a modular system that clients can configure based on their needs, are able to leverage this database.

Outcomes, Not Outputs

Part of Genpact’s evolution, Jon said, is moving away from deals that emphasize outputs (i.e., how many full-time employees are working on a particular project) and toward contracts that deal in outcomes (i.e. cost avoidance and demand management). This ability has made outcome-focused contracts very popular and roughly half of all new client agreements include an outcome-based element as opposed to output-driven fees. Moreover, Jon noted that focusing on outcomes has resulted in better client relationships and a more holistic perspective in general.

This is best shown in the expense management approach that Genpact takes with its spend analytics work, which Jon said creates a fiscal “line-of-sight” so the client team can see which departments are spending the most and where spend is likely to grow in the future. Genpact’s expense management approach allows clients to “start making really intelligent decisions beyond just having a spend report” and can also help the CFO see how beneficial procurement is to the organization. The new Genpact can showcase this value more easily through its financial integration capability, which, according to Jon, creates a linkage between finance, procurement, and the line-of-business to show the value procurement provides to the enterprise.

Looking to the Future

Genpact has about 600 clients creating a significant upsell opportunity for Genpact Source-to-Pay, Kirby said, which right now has about 50 clients. Tapping into the current customer base will help his team attack their ambitious growth goals. In the near-term, they are looking to hire more consulting and category experts to expand their onsite client presence and develop tighter integration across the entire portfolio of services, which Kirby said will be a key part of growing company revenue.

Final Thoughts

The marriage of upstream to downstream is a trend that has accelerated over the last few years. Whether it is a technology acquisition or one in services, providers are driving to become a one-stop shop because procurement organizations increasingly want to simplify their operations and deal with fewer providers. The addition of new strategic sourcing and strategic advisory services via its acquisition of SSE follows this larger trend and enables Genpact to offer an in-house comprehensive set of services that can be delivered in a variety ways (outsourcing, managed services, and consulting).

The procurement consulting and managed services markets are crowded and competitive. The good news is that Genpact’s upsell opportunities are significant – (1) sell source-to-pay services to current Genpact customers and (2) sell the new SSE-led capabilities to current procurement outsourcing customers. To achieve their aggressive targets, Jon and his team will need to continue to integrate the staff and services of two different firm types (a large, global, process-focused BPO and a UK/US-based boutique consultancy) to ensure scalable and cohesive global delivery while also driving awareness and sales of Genpact’s newer offerings.

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