The Outsourcing Imperative: Examining the Need for Procurement-as-a-Service for Mid-Market Financial Firms
January 11, 2024
In today's rapidly evolving business landscape, outsourced procurement has emerged as a strategic imperative for mid-market financial firms aiming to navigate the complex web of external and internal factors influencing their operations. This article explores the macroeconomic forces shaping the need for such services and the dynamics within the vendor environment and delves into the internal challenges firms face. We shed light on procurement’s transformative power in an era of change and uncertainty driven by these three critical factors.
Larger Macro Environment
The need for procurement-as-a-service is first influenced by external factors that companies must adapt to. Four key drivers stand out:
Inflation and Economic Downturns: Increased cost-of-capital, interest rates, and inflation have led to higher prices, making spend management an industry-wide priority.
SEC and Other Regulators: Stringent SEC Regulations have increased the workload on already stretched resources, raising compliance risk.
Cyber Risk: Escalating cyber risks have garnered increased attention from stakeholders, particularly LPs.
Data and Technology Overload: The acceleration of technology has heightened time pressures in investment decision-making, necessitating access to improved data for optimal decision-making, in turn driving up spend.
External Vendor Environment
Factors within the vendor ecosystem significantly influence the cost structures within a firm. These factors can be challenging to control but present opportunities for adaptation. Here are four key factors driving the need for better procurement management in this context:
Escalating Vendor Prices: Vendors often implement substantial year-over-year price hikes, some ranging from 35% to 50% in recent times. Firms are bound to these increases due to their reliance on vendor technology and data.
Shifting Vendor Ecosystem: Divestitures and Mergers and Acquisitions among vendors lead to significant alterations in product pricing models. Vendors may bundle solutions with significant markups, allowing little room for negotiation.
Incomplete Vendor Landscape Awareness: Limited awareness of the complete vendor landscape complicates strategic decision-making and price optimization. Given the constant influx of new products, companies struggle to stay informed, evaluate, and fully grasp them. Keeping up with the latest solutions feels like a full-time endeavor.
Pricing Power: The more critical a solution is for your firm, the more power the vendor wields. Be it market data or technology, maintaining good supplier relationships is essential. Firms can feel trapped by their dependence on vendor technology and data, compelled to accept price increases imposed by vendors.
Internal Firm Environment
Internal factors within firms present unique challenges that create a multiplier effect on spend. These factors often involve the lack of timely information and inordinate administrative burdens, which can be more complex than initially perceived. Here are four internal factors that can complicate a firm's internal abilities:
Fragmented Responsibilities: Vendor management, new purchasing, and renewal responsibilities are typically dispersed across different teams and positions within a firm. This fragmentation can lead to localized decision-making and missed opportunities due to limited information.
Limited Renewal Visibility: Many firms struggle to identify timely contract milestones, often missing auto-renewal deadlines. Vendors provide limited renewal notification, if any, leaving the firm with minimal time to gather usage data, user feedback, and time to iterate on the optimal scope and price.
Pricing Opacity: Many firms lack the peer benchmarking to ascertain what similar-sized peers spend on similar product categories. Peer benchmarking and feedback enhance the effectiveness of negotiation strategies. Without this knowledge, firms are limited in their leverage and negotiating powers.
Volume Challenges: Small to mid-market firms may encounter difficulties due to their limited size, which reduces their negotiating leverage and purchasing power. Outsourcing procurement can help address this issue by pooling spend and resources with other companies for increased bargaining power.
How Can Procurement-as-a-Service Alleviate these Factors?
Procurement-as-a-service offers a distinct advantage by addressing challenges that drive up a firm's costs across three key realms: the larger macro-environment, external vendor ecosystem, and internal firm operations. Concertiv aims to alleviate risk in these areas by providing tailored solutions to tackle these challenges. These solutions encompass product selection and curation expertise, leveraging group purchasing power, securing favorable terms, and optimizing administrative efficiency.
Macro Environment: Concertiv’s exclusive focus across the financial and professional services landscape positions them as market experts, proactively assessing risks and delivering solutions to these businesses even before they become high-priority problems for the firm.
Vendor Environment: With a portfolio spanning over 5,000 managed contracts, Concertiv boasts unparalleled expertise in the vendor landscape. Concertiv Insights with peer benchmarking provides a distinct advantage in negotiations. Product curation and proficiency in assessing new products ensure the identification of the ideal solutions for your needs.
Firm Environment: Through the streamlined procurement platform Concertiv360, firms can consolidate all their vendor contracts into a single, accessible hub. This centralization facilitates enhanced insights into timely renewal milestones, usage & scope redundancies and provides great administrative lift through license and entitlement management. Additionally, Concertiv uses group purchasing power to drive best-in-class pricing that is otherwise unavailable to mid-market clients.
Concertiv's Methodology to Procurement-as-a-Service
Concertiv helps firms save more than 20% across key spend categories, including Travel, Market Data, Technology, and Insurance. Concertiv leverages its proven methodology to obtain these savings. While the approach for each domain may slightly differ, the methodology may stay the same:
Centralize: We organize your vendor contracts seamlessly within our procurement platform.
Negotiate: We curate the best products and prices through expert negotiating due to unparalleled insight and purchasing power.
Manage: We reduce your administrative burden by managing vendor contracts, invoices, and entitlements.
Optimize: We optimize portfolio efficiency yearly, achieving substantial cost savings and enhanced product utilization.
Concertiv's true prowess lies in its immediate cost-saving capabilities and devise long-term strategies that consistently boost savings year after year. Consider Coller Capital as a case in point: In the first year, they realized savings of $110,000. By the second year, these savings surged to $438,000, culminating in an impressive 4.2x lifetime ROI on fees.
Beyond Savings: Concertiv is the Procurement Answer
In an ever-changing business landscape defined by macroeconomic challenges, complex vendor interactions, and internal operational hurdles, the case for outsourcing procurement has never been more compelling. By centralizing, negotiating, managing, and optimizing procurement processes, Concertiv empowers companies to realize immediate cost savings and to chart a course toward sustained financial efficiency and growth. As the business world continues to evolve, Concertiv's commitment to delivering results remains unwavering, making it an indispensable partner for organizations navigating the complexities of modern procurement.
Interested in learning more about procurement-as-a-service for your firm?
Learn how leading firms are partnering with Concertiv to reduce spend, minimize risk, and save time across key spend categories.