Services procurement is different. It's nuanced. The thing you're buying is often complex and is open to interpretation and subjectivity. Unlike ordering and receiving goods, components and materials, the outcome can't easily be counted. Services are intangible.
But for a business looking to understand what it's getting in return for its services spend, this isn't much help. To really understand the impact and value of this spend category, services need to be made tangible.
Start with defining and measuring
To be able to, metaphorically, grab hold of services procurement, you need to establish some basics:
Defining: The elements of your services spend need standardised characteristics, attributes, behaviours and dimensions. This will allow you to make useful comparisons across all services spend categories and projects. In practical terms, this can mean a few things. At the supplier-level, you will need to think about the attributes that are meaning for you. This could be simply rate card information, or it could mean scoring their environmental impact. For individual projects, this could involve standardising categorisation or documenting milestones values and dates.
Measuring: The qualitative and quantitative metrics or KPIs should allow you to performance against benchmarks or targets. Again, in practical terms, this means standardising the metrics you use to measure the characteristics and attributes mentioned above. For example, this might be using a 1-5 scale to measure a supplier's proficiency in collaboration and communication.
In short, if something has a name and a unit of measurement it's much easier to evaluate in a way comparable to tangible spend categories, like goods and materials.
Record data down to the milestone level
The quantitative measure of services, whilst complex, can be distilled down to three main themes:
Cost – What did the project cost versus budget?
Time – Was the project completed on time?
ROI – What outcome did the project deliver against its objective?
Overcoming the cost and time issues are arguably more straightforward - the right services spend technology can help define, track and measure the projects down to the milestone and give an accurate view on cost-against-budget and time-against-deadline.
However, creating a tangible measurement of ROI is where things get interesting. How do you measure the quality of a service? Or how innovative a solution is?
Adding both qualitative and quantitative perspectives
Creating a tangible measure of a project's value or return requires adding a layer of qualitative feedback - asking stakeholders to score the project's outcome against defined criteria.
Of course, the challenge here is providing a structured mechanism for collecting and consolidating measurable feedback on nuanced areas of qualitative feedback. For many, this extremely valuable performance data is lost in email correspondence, disjointed surveys or in the depths of an excel workbook.
Being able to create relevant, consistent and structured qualitative review components enables you to easily consolidate qualitative feedback from all project stakeholders into a quality rating metric and connect this insight to specific projects, milestones and suppliers.
Tangible data creates meaningful insights
Once quantitative and qualitative data is combined it creates a tangible measurement for procurement to use as a basis for decision making. The organisation that can really understand the ROI on their services spend, can elevate their resourcing decisions beyond a simple comparison of day rates and ensure every project is delivering quality results, on time and on budget, with the right supplier.