Purchasing professionals at such world-class companies as IBM, Intel, Hewlett-Packard, United Technologies and Microsoft are pushing to streamline the human resources (HR) services buy.

And for good reason: The HR-services spend touches every employee in a company in one way or another—from the CEO to the shop floor. It includes such services as contingent labor, medical and dental benefits, relocation and retirement plans. Furthermore, it is a complicated category with differing policies, made even more complex when purchasers attempt to leverage the spend and consolidate the supplier base globally, which, of course, is exactly what they want to do.

But purchasing is making strides.

Nowhere is this more evident than at Armonk, N.Y.-based IBM, where purchasing has been involved in the HR services spend worldwide for nearly 20 years. Procurement's responsibility was strengthened when Gene Richter came on board in 1994 to centralize the company's purchasing activities. To recognize the efforts of Richter and his team, Purchasing presented its Medal of Professional Excellence to IBM in 1999.

Now, a global procurement team led by Jonathan Sweeney, global procurement manager for business services in IBM's Integrated Supply Chain organization, is implementing an agreement with a global supplier for the company's relocation services that helps reduce costs by $500 million. (IBM doesn't release figures that break out its annual spend; the company buys $40 billion annually all told.) The global procurement team also is sourcing recruiting and payroll services globally. Terms of these agreements extend to clients of IBM who outsource HR services procurement and management to IBM Business Transformation Outsourcing (BTO).

For IBM, the HR spend category consists of a wide range of sub-categories that consist of such services as staffing, relocation, payroll, benefits, compensation, succession planning, training and outplacement.

Sweeney's team works closely with global procurement's internal and external clients. Internal clients consist of representatives of the company's human resources function. External clients are those who outsource HR management to IBM BTO worldwide.

Sweeney:  “Our responsibility is to put in place the best deal for IBM.”

The team is global, and works with a dedicated buyer or buyers in countries where IBM has employees to leverage the spend and customer requirements.

Sweeney's aim is to consolidate the spend with fewer suppliers. "That's not going to be possible in all geographic areas, with languages and different policies, but where we can, that is our strategy," he says. "We are consistently refining strategy going forward and identifying marketplaces and suppliers we need to be working with to provide HR services."

The global procurement organization at IBM documents its sourcing strategies in playbooks that also consist of well-documented procurement white papers that describe how the teams approach each of the markets.

"To Jonathan's credit, he's been able to 'industrialize' our strategies or playbooks to the point that they are presented in a format that provides ease of knowledge transfer from thought leaders and strategists that support him to buyers and managers in countries where IBM procures HR services," says Edward O'Donnell, global sourcing manager, IBM Integrated Supply Chain.

The playbooks present essential elements of the deal that require competitive analysis and it's done in such a way that the team can easily understand and then execute. "That's always a big challenge," he says. "In new and emerging markets such as the Asia Pacific region, there are young buyers and managers clamoring for this type of well thought out and well presented knowledge that we developed in global procurement."

O'Donnell credits CPO John Paterson's leadership on the playbooks to expand procurement's influence over the company's HR services buy around the world. The playbooks also serve as a tool for the company's sales team to help external clients quickly understand the benefits the strategy brings both short and long term, he adds.

As purchasing operations at many world-class companies do, IBM global procurement uses a seven-step strategic sourcing process to purchase HR services. The process includes such activities as gathering market intelligence and defining sourcing strategy to selecting a supplier and managing the agreement.

There's a rigorous cadence to IBM's process, says Sweeney, explaining that his team uses individual steps every day. Yet when approached with some new business by an internal or external client, he says he pulls it out "to explain how we approach the problem. It's a very nice step-by-step approach to what we are going to do and what the client can expect at the end in terms of results."

O’Donnell:  “If we had our druthers, we’d have two or three wonderful suppliers.”

Still Sweeney and his team are witnessing "tremendous" growth as suppliers become more capable of servicing IBM and its customers in other regions of the world. As such, the team looks for suppliers willing to synchronize their development plans with IBM's go-to-market plans so strategies complement one another.

"We want to industrialize repeatable, canned solutions that are easily transferred," says Sweeney. "We don't want to have to go through the development or sourcing expense. Our suppliers are delivering in such countries as Vietnam and Thailand as the deal scales. That's what we love in a set of suppliers."

The HR services team uses a standard IBM global procurement tool to measure and evaluate performance of suppliers.

"The tool works on the premise that we want to award more business to our top-performing suppliers and less to lower-performing suppliers, so that over time we're doing business only with the best of the best," says O'Donnell. "That's our philosophy and it's been that way for a while. We drill into the service level agreements with our cross-functional partners and have those specific discussions on where we need to improve and where a particular partner may need to invest in order to exceed expectations. But this cadence also goes on regularly."