The Case for Smarter Services Procurement: Why It’s Time To Take Control

This post is the first in a five-part series exploring how organizations can master services procurement, a critical category that represents more than half of enterprise spend and continues to rise.

Every year, organizations aggressively negotiate on the goods they buy. They run competitive tenders, enforce preferred supplier lists, and track savings to the penny. Yet when it comes to services, which often account for more than half of an organization’s indirect spend, the same level of scrutiny rarely applies.

This is the services procurement paradox: The category that represents the most spend, the most risk, and the most opportunity is often the least controlled.

What is services procurement and why does it matter?

Services procurement covers the sourcing, management, and payment of external services across several broad categories including simple services engagements such as catering, printing, and translation; outsourced services such as call centers, facilities management, and security; and project-based statement-of-work (SOW) engagements such as construction, software development, and consulting.

Unlike tangible goods, services leave no physical footprint. There is no delivery receipt, no inventory count, and no easy way to verify that what was originally agreed upon was ultimately delivered. That invisibility is precisely what makes services procurement both challenging and substantial.

The market context

The scale of services spend is significant and one of the fastest growing spend categories in the enterprise. When you look at your budget, you probably find that more than half of your indirect spend is going toward services and contingent labor.

According to Ardent Partners:

Gartner Research highlights that procurement leaders are under increasing pressure to extend control beyond traditional goods categories, with services procurement cited as one of the top areas for investment and improvement over the next two years. Meanwhile, regulatory complexity is rising. Legislation such as IR35 in the U.K., worker classification rules in Europe, and expanding ESG reporting obligations impact how organizations engage and manage service providers, and is attracting board-level attention.

At the same time, the nature of services spend is shifting. Organizations are relying more heavily on external providers for functions that were previously in-house, driven by cost pressure, skills gaps, and a desire for operational flexibility. Forrester notes that the use of both outcome-based and project-based service engagements has grown significantly in the post-pandemic era, increasing both the volume and complexity of services procurement activity.

Why services procurement is hard

The challenges of services procurement are well understood by anyone who has tried to bring this category under control.

• Spend is fragmented and invisible. Services are frequently booked outside of procurement — on purchasing cards, through informal agreements, or via legacy supplier relationships managed entirely by the business. Without visibility, organizations lack leverage, benchmarking, and accountability.
• Processes are inconsistent. Every team handles service agreements differently. SOWs vary in quality, approval workflows differ, and supplier selection is often based on familiarity rather than competitive assessment. The result is a patchwork of arrangements that is impossible to manage at scale.
• Outcomes are hard to measure. Unlike a product, services do not arrive in a box. Defining what "good" looks like, and verifying that it has been delivered, requires structured frameworks that most organizations lack.
• Risk and compliance exposure is significant. Without standardized due diligence, organizations are exposed to supplier financial risk, labor compliance issues, data security vulnerabilities, and reputational harm, often without knowing it.
• Invoice and payment complexity slows everything down. Milestone billing, retainers, time-and-materials arrangements, and change orders all require different handling. Without automation, the administrative burden falls on finance teams that are already stretched thin.

What ‘good’ looks like

Organizations that have brought services procurement under control share several common characteristics. They have full visibility into what they are spending, with whom, and the agreed upon scope. They use standardized SOW templates and approval workflows that make compliance the path of least resistance — not a process to be circumvented. They connect sourcing, contracting, and payment in a single process, eliminating the manual handoff gaps where value leaks. And they track supplier performance systematically, so decisions about renewals and re-sourcing are based on data rather than instinct.

When you get this right, the results speak for themselves. According to the Hackett Group, organizations with mature services procurement capabilities achieve savings rates two to three times higher than their peers, while also reducing compliance risk and improving supplier relationships.

The cost of standing still

The risk of inaction is not theoretical. Unmanaged services spend leaks value through maverick purchasing, duplicate suppliers, scope creep, and overbilling. Compliance failures carry financial penalties and reputational consequences. And the opportunity cost to not leveraging the organization’s full buying power across its service provider base can be substantial.

In the blogs that follow, we’ll explore three distinct services procurement use cases: simple SOW services, outsourced services, and project-based engagements. Each presents its own challenges and opportunities, and each rewards a structured, technology-based approach.

Want a head start? Check out our Services Procurement page to see how we help organizations manage simple services, complex SOWs, and contingent labor in one place.

Ready to dive deeper? In our next post, Getting the Basics Right - Managing Simple Services SOWs with Confidence, we’ll explore how to bring clarity and control to your simple services engagements.