Research Shows Big Firms Spend Big For Services

Compiled By Jill Jusko Services spending is a large component of organizations' overall purchasing, new research shows. According to CAPS (Center for Advanced Purchasing Studies) Research, the mean amount spent for services by large organizations equals 158% of firms' spend for indirect goods, according to data collected from 115 organizations across multiple industries. And of a firm's total spend, services accounts for 33%, compared with 51% for direct goods and 21% for indirect goods. Initial results from the research are compiled in "Defining and Determining the 'Services Spend' in Today's Services Economy." Procurement software provider Elance Inc., Sunnyvale, Calif., contributed to the report. Despite the large role played by services spend, companies' abilities and capabilities to leverage this portion of their procurement dollars lags behind that of direct and indirect goods, the report says. As a result, services spend continues to be a large, untapped profit lever. Other survey results show that:

  • Purchasing departments have less control over services spend than that of direct and indirect goods.
  • Companies report 74 active suppliers per purchasing employee for services, more than twice what it is for direct goods and 20% higher than for indirect goods.
  • The mean annual services spend in surveyed organizations was $985 million.
"Having spent hundreds of millions of dollars on e-procurement systems designed to streamline spending on indirect goods, enterprises are now realizing that spending on services represents an even larger opportunity for cost savings and efficiency improvements," notes D. Steven Wade, director of benchmarking for CAPS Research, Tempe, Ariz.
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