I concluded my March 2013 report on the role of software assets in business innovation by proposing that “The combination of software assets, strong domain expertise, analytics, and as-a-service delivery models will increasingly allow traditional service providers to reinvent the way they deliver business value to their clients.” I was glad to hear that IBM recently announced a deal with L’Oréal that directly supports this position. The announced engagement actually includes all these components:
- The procurement domain expertise of IBM Global Business Services addresses business pain points. L’Oréal USA grew rapidly over the past few years via an aggressive acquisition strategy that caused indirect procurement processes to remain highly disparate. The company knew that there was a significant gap between negotiated savings and realized savings in its indirect procurement operations. IBM GBS consultants brought strong procurement expertise to work with L’Oréal’s existing sourcing team to transform existing processes. IBM Global Process Services (GPS) category experts are working with L’Oréal to develop and implement category sourcing strategies.
- The Emptoris platform brings a set of standardized procurement tools. Lack of standardized tools, poor data quality, and limited visibility into process performance across the organization led to missed cost savings targets every year.With this deal, L’Oréal plans to standardize its procurement systems on Emptoris, a leading ePurchasing vendor that IBM acquired in late 2011. This solution, that also includes spending analytics tools, will be delivered as a service and hosted on IBM’s SmartCloud offering.
- A compliance analytics tool (CAT) will help deliver business outcomes. For complex procurement operations involving a large number of categories and suppliers, finding the root cause of purchases that fall outside of procurement policies and processes is like finding a needle in a haystack. Simply having the right tools and processes are not enough to ensure that the savings will be realized. IBM Research and GPS developed CAT that uses advanced analytics to deeply mine the procurement data and identify transactions that do not comply with the implemented processes. CAT can also project and evaluate the impact of potential corrective actions, allowing L’Oréal to see more savings hit their bottom line.
Another interesting aspect of this deal’s construct is that IBM is able to capture the knowledge and expertise gained through this project via its cloud-based analytics tools and then share this knowledge and expertise across different clients. As algorithms are adapted and improved from one client to the next, IBM is in fact able to replicate the business value across its client base. Quite different from your typical BPO deal!
Bottom line: This is an innovative example of the “One IBM” value proposition, with IBM Research, IBM Software Group, IBM GPS, and IBM GBS consulting coming together to deliver incremental business value to the client’s business stakeholders.