April 22, 2009

Hackett: By Controlling Project-Based Indirect Spending Companies Can Net Significant Savings

  • Global 1000 Companies Can Save $74 Million/Year By Improving Performance in this Area
  • Free Webcast on Study Findings Scheduled for April 27

ATLANTA & LONDON, April 22, 2009 - Typical Global 1000 companies can drive up to $74 million in annual procurement cost reductions by improving their control of project-based indirect spending, according to a new study by The Hackett Group, Inc. (NASDAQ: HCKT).

Hackett's study looked at how effectively procurement organizations manage and control non-recurring project-based indirect supplier expenditures in IT-Telecom, HR, Sales & Marketing, Finance & Corporate Services, and Capital Equipment & Services. The study, which polled both procurement organizations and also the budget owning functions, found that project-based spending represents up to 35% of all the total procurement spending, and is often not well supported by the sourcing resources or processes of purchasing departments. In fact, the process is managed by dedicated sourcing professionals with specialized expertise only 17% of the time.

Insufficient procurement staff resources, the need for specialized functional expertise, and the requirement of fast turnaround are three of the most common reasons for limited procurement involvement in managing project-based spending, according to the study. But the support gap creates a "lose-lose" situation where procurement best practices are not applied. As a result, both purchasing and budget owners are generally disappointed with the results, the study found. Budget owners are particularly dissatisfied with resulting pricing, contract flexibility, and the ease and timeliness of the process.

The study quantified an achievable opportunity for a typical Global 1000 firm to drive $74 million in annual spend cost reductions (on an average annual indirect spend of $4 billion) by applying procurement best practices and increasing the percent of spending under their control to world-class performance levels. Hackett will discuss key findings from this study in a Webinar currently scheduled for Monday, 4/27 at 11 am.

According to Hackett Research Director Pierre Mitchell, "In today's economic climate, there's more pressure than ever before to get the most from every purchase. At the same time, businesses are trying to meet ever more aggressive operational goals. Yet a disturbing amount of ad-hoc spending, for projects ranging from IT infrastructure to trade shows to executive search and recruitment, is slipping through the cracks, and established procurement practices are simply not getting applied.

"Procurement organizations have a tremendous opportunity here, both in terms of demand management and also to utilize a sourcing process and capability that better accommodates this type of one-off project-based spend," said Mr. Mitchell. "Otherwise they set themselves up for failure, and miss a tremendous opportunity to reduce spending, improve contract flexibility, and generally better support their company from a strategic business perspective."

Hackett will discuss key findings from this study, including performance gaps, opportunity calculations, root causes, best practices, and lessons learned from firms who are successfully addressing this spend segment, in a Webinar currently scheduled for Monday, 4/27 at 11 am. For more information, or to register for the Webinar, visit:


About The Hackett Group

The Hackett Group, Inc. (NASDAQ: HCKT), a global strategic advisory firm, is a leader in best practice advisory, benchmarking, and transformation consulting services, including shared services, offshoring and outsourcing advice. Utilizing best practices and implementation insights from more than 4,000 benchmarking engagements, executives use Hackett's empirically based approach to quickly define and prioritize initiatives to enable world-class performance. Through its REL brand, Hackett offers working capital solutions focused on delivering significant cash flow improvements. Through its Hackett Technology Solutions group, Hackett offers business application consulting services that helps maximize returns on IT investments. Hackett has worked with 2,700 major corporations and government agencies, including 97% of the Dow Jones Industrials, 73% of the Fortune 100, 73% of the DAX 30 and 45% of the FTSE 100.

Founded in 1991, The Hackett Group was acquired by Answerthink, Inc. in 1997. Answerthink was renamed The Hackett Group, Inc. in 2008. The Hackett Group has global offices in the United States, Europe and Asia/Pacific.