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Buying services has always been around, but it's seen a significant spike as of late with an increasingly digital work environment and reliance on online services, not to mention remote teams. Companies are now buying more services than ever to fill in gaps their companies cannot take care of in-house.
Services also help them bypass inefficiencies and stay ahead of the competition, using the latest technologies and smartest industry minds to their advantage.Outsourcing has seen a massive increase in the past 10 years and experienced stable growth over the last years.
The services sector makes up 80% of the UK’s GDP and 68% of that in the US. At the same time, the West experienced a shift from buying materials to services, while production and the need for materials moved East.
The industry has been fraught with problems and ongoing challenges; we’ve compiled a comprehensive list of issues that our clients have faced when buying services, and how they could possibly resolve them.
Though companies stand to win a lot from outsourcing to third-party companies - the service buying benefits are real - they can also run themselves into some trouble if the processes and right mindset exist. Buying services has its fair share of challenges and negative outcome when not managed correctly:
1. Slow processes and lack of automation:
Companies with the intent to “go to market" aren't finding and working with service providers quickly enough. They lack automation and spend time on tedious tasks. These bottlenecks hamper their ability to find the right tech company to fix IT issues, agencies to launch a successful brand campaign or communication team to grow visibility team, among other issues.
2. Channel overload:
Communication problems are a leading issue in many companies, which inherently applies to service buying as well. With what’s often called “App Fatigue”, employees are overwhelmed by the numerous channels – be it Slack, email, Skype, Telegram, or other – they need to communicate within and outside of their organization.
What’s missing is a single point of truth to handle each and every step in the service procurement process.
3. Lack of transparency on a horizontal and vertical level:
Misalignment happens between teams and executives who don't have a common knowledge about which services are currently in use/being bought, and this only accrues with larger companies.
4. Flawed selection process:
Unfortunately, some companies aren't using the very best service for their needs because they've relied on word-of-mouth or other types of undeveloped research methods. This leads to bias when only services within your network are considered.
5. Overspending:
Next to a narrow selection process, many companies are also spending too much or not in the right place. Some organizations have an unhealthy spending culture that escalates to all departments and needs to be nipped in the bud.
6. Maverick buying:
Employees within a company don’t consider spending policies or other metrics when buying a service and entangle their companies in expensive financial obligations.
7. Lack of monitoring and a general overview:
In many cases, individual managers will each manage one or two external contractors, but forget monitoring and progress checking when other tasks get in the way or faced with a time crunch. Also, managers don't have a reliable way to monitor progress.
Though this may be alright with one or two, it gets much more complicated to manage numerous service providers; each new one makes it more difficult to monitor them all properly.
9. Tedious invoicing:
Manual work, data entry, and a lack of automation cause invoicing and financial control at the end of each month to be one of the biggest headaches companies face.
10. Compliance oversight:
Forgetting about laws and regulations can be fatal, especially when your company accidentally breaks one. A legal breach can result in fines and even the removal of a business license. This applies heavily in Europe and in the US, where tough regulations dictate what you can and can’t do.
For example, the EU’s GDPR has certain rules on how to manage supplier data, in addition to how they can use yours. Compliance is an integral part of service procurement, so keeping it in check is non-negotiable.
The problems mentioned above stem from:
That’s why automation and data are vital in buying services, just like any other task companies undertake, be it social media, content management, developing, hiring, etc.
Companies need to implement streamlined, data and AI-driven ways of finding suppliers, communicating with them, getting the best value for money (bidding), measuring deliverables, analyzing results, and finally, managing payments.
That’s where service procurement tools come in, which serve to alleviate burdens companies often feel when choosing which services to buy and use to meet their corporate goals.
Service buying tools offer the following advantages for companies looking for vendors:
Mercanis helps you resolve over buying, unpredictable costs, lack of compliance and decentral knowledge from sourcing to project completion.
Have you faced some of these issues in your company? Whatever the business or department you work in, buying services can be made a lot easier when you use the right tools, which will ultimately improve your company’s success on multiple levels.
To resolve the challenges mentioned above, focus on a structured and clear process to drive transparency, communication, cost-effectiveness, and performance.
Book a meeting with us to learn more about Mercanis.
Moritz Weiermann is co-founder and COO of Mercanis. He holds a Bachelor's degree from Bocconi University and a Master's degree from WHU. With a career spanning leadership roles at BMW, Volkswagen, Klöckner.i, Optilyz, and Scoutbee, he has extensive experience in procurement, supply chain management, and digital processes.
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