Why Marketplaces, P-Cards, and BPOs Failed to Fix Tail Spend

Procurement leaders have chased tail spend efficiency for over two decades. Along the way, multiple “solutions” emerged — corporate marketplaces, purchasing cards (P-cards), business process outsourcing (BPOs), and tactical buying desks. On paper, they promised convenience and savings. In practice, they fell short.

The Hackett Group’s 2025 Tail Spend Management Study shows the result: 64% of procurement leaders are dissatisfied with their current approach to tail spend. Even though companies capture 7–10% savings today, executives believe up to 20% is achievable. The persistent gap is proof that old fixes never addressed the root problem.

So why exactly did these approaches fail, and what’s different today? Let’s break it down.

What Is Tail Spend, and Why Does It Matter?

Tail spend is typically defined as the 20% of spend spread across 80% of suppliers. It includes thousands of small, fragmented purchases: office supplies, facilities maintenance, marketing services, packaging, training, and more.

Individually small, these buys collectively represent a major value leak. McKinsey research highlights that unmanaged indirect and tail spend can cause 20–30% leakage in negotiated savings.

For clarity on how tail spend differs from tactical or maverick spend, see our dedicated primer: Tail vs. Tactical vs. Maverick Spend.

Why Did Marketplaces Fail to Solve Tail Spend?

Marketplaces — corporate catalogs and platforms — were hailed as procurement’s “Amazon moment.” They simplified ordering, but never addressed the complexity of tail spend.

• Fragmentation: Instead of consolidating, marketplaces expanded supplier bases, often leading to compliance gaps and diluted volume leverage.
• Governance Gaps: Gartner has noted that while marketplaces improve user experience, they create “shadow procurement” where spend is visible but uncontrolled.
• Price over Policy: Buyers chase lowest listed price without considering total cost of ownership, rebates, or sustainability requirements.

Explore Procure-to-Pay solutions that embed compliance directly into the buying process, overcoming the governance gaps of marketplaces.

Read more: The Silent 20%- Why Tail Spend Is Procurement’s Hidden Goldmine

Why Did P-Cards Fail to Deliver Value?

Purchasing cards (P-cards) promised to reduce administrative burden by allowing employees to make small buys directly. While they solved tactical pain points, they created strategic blind spots.

• Lack of Leverage: P-card buys are too fragmented to deliver negotiated savings.
• Minimal Visibility: Finance may see transaction totals, but procurement loses line-item insight into categories.
• Compliance Risks: Without oversight, P-cards often become the tool for maverick spend — off-contract and off-policy.

According to BCG, organizations relying heavily on P-cards often see “savings erosion” because they bypass negotiated contracts and supplier programs.

Why Did BPOs and Tactical Buying Desks Miss the Mark?

Business process outsourcing (BPOs) and internal tactical buying desks were introduced to “outsource the problem.” The logic was simple: tail spend is messy and non-strategic, so let someone else handle it.

The flaws quickly emerged:

• Adoption Issues: Business users often bypass BPO channels due to slow turnaround times.
• Category Limitations: BPOs lack deep category expertise, leading to transactional execution without optimization.
• Cost Trade-Offs: Outsourcing labor is cheaper, but doesn’t scale. Costs eventually outweigh benefits when complexity grows.

Hackett’s 2025 study confirms this — leaders remain dissatisfied because outsourcing fixes execution but not orchestration.

The Common Thread: Why All These Models Failed

Each legacy model — marketplaces, P-cards, BPOs — attacked symptoms, not root causes. Tail spend’s challenges are:

• Volume: Thousands of low-value, high-frequency requests
• Fragmentation: Too many suppliers across categories and regions
• Lack of Orchestration: No single system intelligently routes, negotiates, and enforces compliance

Without orchestration, tail spend remains unmanaged chaos.

What’s Different Today: The Role of AI and Orchestration

The Hackett study found 88% of procurement leaders are open to AI-powered agents for small-value negotiations. This signals a readiness for the next generation of solutions.

Agentic AI changes the game:

• Intake-Oriented: Captures spend at the source with guided workflows (Merlin Intake)
• Negotiation at Scale: Uses Autonomous Negotiation Agents (ANA) to handle high-frequency, low-value transactions
• Policy-Driven Compliance: Ensures every purchase routes through approved suppliers and contracts
• Global Execution: IBM’s services intelligence and governance provide scale, change management, and category depth

Together, this is not a patchwork of fixes but a holistic model that finally addresses tail spend’s structural challenges.

Regional Dimensions of Failure and Opportunity

• North America: Heavy reliance on P-cards created blind spots. AI-driven intake brings visibility back.
• Europe: VAT and ESG compliance make fragmented marketplace buys risky; orchestration ensures policy adherence.
• APAC: High transaction volume overwhelms BPO models; automation scales better.
• LATAM: Supplier diversity and fragmentation demand stronger governance than tactical desks can offer.

By tailoring orchestration to regional realities, enterprises unlock not just savings, but compliance and resilience.

Real-World Proof: Early Momentum

In just the past month of soft launch, Zycus and IBM have already begun 10+ tail spend programs across the U.S., Europe, and China. Categories range from facilities management to marketing services.

This early traction proves that procurement leaders are ready to move beyond failed fixes and embrace holistic, AI-orchestrated models.

Key Takeaways

• Marketplaces increased fragmentation rather than solving it.
• P-cards reduced friction but created compliance and visibility gaps.
• BPOs provided labor arbitrage but not orchestration or adoption.
• All legacy models failed because they targeted execution, not the root cause: lack of orchestration.
• The future lies in Agentic AI, intelligent intake, and global execution at scale.

Next Steps

Download The Hackett Group 2025 Tail Spend Management Study to benchmark your performance.

Related Reads:

1. Podcast: From Neglected to Negotiated: How Agents Captures More than $50M in Tail Spend
2. A Comprehensive Guide to Spend Management
3. Agentic AI for Procurement Tail Spend Management
4. Guide to Tail Spend Analysis: What it is and Why it Matters
5. Navigating Efficiency with Tail Spend Management Solutions
6. Whitepaper: Tail Spend Optimization through GenAI Automation
7. 5 Key Benefits of Automating Tail Spend Management