Managing Services Spend

Survey from CAPS Research finds services spend to increase by 13 percent over next five years

Survey from CAPS Research finds services spend to increase by 13 percent over next five years

Sunnyvale, CA — July 30, 2003 — Elance Inc. and CAPS Research (the Center for Advanced Purchasing Studies) have released a report that highlights key findings from CAPS Research's latest benchmark survey on services spending in large enterprises. Titled "Managing Your Services Spend in Today's Services Economy," the report is the second in a continuing series of research reports dedicated to understanding services spend in today's enterprise, according to CAPS.

"While providing new details about spending by specific service categories, the data we collected is remarkably consistent with our original services benchmark study," said D. Steven Wade, director of benchmarking for CAPS Research. "Survey respondents ranked their competence in buying and managing services much lower than their competence in purchasing direct and indirect goods. It's clear that enterprises are still grappling with the challenges of services procurement and that they will have to master a new set of skills and business processes as they attempt to reduce services costs and better manage service delivery."

The report, based on survey responses from 52 organizations (with average revenues of $9.6 billion), examined how those organizations manage their overall services spend. The report confirms the findings of the December 2002 study, noting that services purchases averaged 31 percent of total purchasing spend, and reveals new information about services spend. Among the findings:

  • Services spend continues to increase: During the next five years, purchase spending on services is expected to increase an average of 13 percent. More than half of respondents expect services spend to increase by 22 percent.

  • Services are difficult to buy and manage: 70 percent of participants reported that buying services is more difficult or very difficult when compared to buying goods. Seventy-five percent of participants reported that managing the delivery of services is difficult or very difficult when compared to managing the delivery of goods. No respondent said that buying or managing services was much easier than buying and managing goods. Organizations feel less capable in sourcing, procuring and managing services as compared to goods.

  • Enterprises rely on large numbers of services suppliers: Companies reported an average of 2,321 services suppliers with 8 percent of respondents reporting more than 5,000 services suppliers.

The report also examines "hybrid" or "bundled spend" finding, for example, that 25 percent of services purchases are bundled with goods.

In addition, the report provides information about services spend activities by functional categories including a breakout of services spending by category, adoption of formal services supplier management programs, use of various procurement methods, use of various contracting methods, and ranked benefits and features of software solutions for services procurement and management.

"This latest phase of our continuing research into services and hybrid spending demonstrates, once again, the need for software solutions that help businesses improve the way they buy and manage services,Ó said Fabio Rosati, president and CEO of Elance. "It also underscores the point that these solutions must be built for the unique needs of services and hybrid spend."