Recently, SIG had the pleasure of hosting a panel of Everest Group experts for the July CPO & Executive Virtual Series. The panel included Vice President, Sourcing and Vendor Management, Amy Fong, Chief Research Officer, Michel Janssen, Everest Group Partner, Jimit Arora and Pricing Assurance Partner, Rahul Gehani. It was a very engaging discussion that lasted nearly two hours with tons of excellent takeaways. Let ‘s get into it!
Trends of the 2020 & 2021 Service Provider Wages
The focus of the meeting was BPO and IT services and the industry trends related to the supply market and successful buy-side organizations. Jimit Arora kicked the roundtable off with the findings from 2020 and early 2021 regarding the rates of IT and BPO services. One of the major points of emphasis was the renegotiating of rates after the dust settled from 2020.
Many of the suppliers realized that the previous rate discounts that were granted during the work-from-home scramble weren ‘t sustainable. As Jimit stated from Everest Group ‘s findings, we are seeing situations where suppliers are going back to their clients saying, Hey, we need to re-up these rates, right?
A major reason for this change is due to the inflation of the labor market. The question many companies are asking themselves is how do you get your resources for what you need to accomplish at the correct pay rate, while still making it feasible to where people want to work versus just going on unemployment . This issue is causing a constraint in general on the market and the talent pool that’s available right now. And this remains true whether you view this from a United States perspective or an offshore international perspective.
Some organizations are taking new approaches to secure their own talent. Everest Group Partner, Rahul Gehani shared a key observation from the recent Everest Group study on how companies are now building funds to keep their talent. “Cognizant has a $13 million dollar fund to match the salaries that employees are getting from other competitors”.
How Does the Business Prepare for This New Reality?
So as this new reality of labor inflation and service provider wage increases work to balance themselves out, the next question is how does the business adjust to this new reality . Understanding the overall value that your procurement and sourcing organization is bringing to the table, is key to remaining strategic. This allows the procurement and sourcing teams to look beyond just the hard, year-over-year savings.
Understanding the full picture enables sourcing and procurement to help the business get past this new reality. Because this isn’t just last year, it’s this year and will likely continue into the future. Everest Group VP, Amy Fong made a great point on this topic, to be successful there needs to be an internal collaboration with the CFO, the IT team and the CPO to leverage stakeholders for the long term of business value . Moving from costs to value and more strategic decision-making will be how the business treads these new waters.
The Extinction of the CIO and CTO
One of the most interesting points to come from this amazing discussion was the future of the CIO and CTO and if it will eventually be replaced. SIG CEO &President, Dawn Tiura posed the statement, ” in a recent session I overheard the idea that the office of the CTO or the CIO is likely to go away due to IT being absorbed into every single business unit”. This caused a myriad of reactions from attendees due to so many organizations still navigating through their new digital priorities. Some CTO’s want full technological control while others are just “keeping the lights on” with the business’s core systems. Even the possibility of a new Chief Digital Officer was posed as a possible solution.
This fantastic conversation uncovered many of the interesting trends that are certainly key to follow in the near future. As always, SIG looks to remain focused on what’s around the corner within the procurement and sourcing industry, and events like these always prove that to be true. Make sure to stay tuned with the SIG event calendar to join the Procurement 3.0 conversation!
The CPO Executive virtual series is for buy-side executives to learn, network, and brainstorm on the challenges facing their organization and the industry at large.
Join the discussion at our next CPO & Executive Virtual Series in September as Nitin Khorana, Vice President from Icertis will explore maximizing supply chain potential with contract intelligence, followed by topic-based discussions on digitalization within procurement and sourcing.