Organizations are seeking to transition to a cost+value model of procurement outsourcing, where the entire procurement function shifts from an operational role to a business enabler role
Dallas, TX (PRWEB) October 13, 2016
The global multi-process Procurement Outsourcing (PO) market witnessed decent growth of 10 percent in 2015, reaching US$2.3 billion in size, led by strong adoption by North American manufacturing, consumer packaged goods (CPG) and retail segments, according to new research from Everest Group.
PO buyers cite cost reduction and analytics support as their two most crucial needs. In response, service providers are increasingly adopting robotic process automation (RPA) to usher in a new round of cost savings in such areas as administering purchase orders, invoice processing, fraud/duplicate payment detection, claims processing, and conducting arrears review. Similarly, buyers are increasingly asking for analytics solutions because they enable savings and minimize financial and operational risks. Typically, buyers lack in-house analytics capabilities, tools and expertise, so they are increasingly looking to service providers to plug this gap. Buyers list analytics expertise as one of the top three service areas in which they would like to see improvement by their outsourcing partner.
Growth in the PO market can also be attributed to an emerging trend of buyers seeking more end-to-end coverage. PO contracts are moving towards multi-tower scope, with an increasing inclusion of finance and accounting, supply chain management and human resources outsourcing processes in addition to traditional procurement processes.
“Organizations are seeking to transition to a cost+value model of procurement outsourcing, where the entire procurement function shifts from an operational role to a business enabler role,” said Megan Weis, vice president, Business Process Services, at Everest Group. “Service providers play a key role in this transformation effort by providing best-in-class process efficiencies, technology solutions, and supplier relationship management that collectively contribute value far beyond cost arbitrage to the organization. Value-added contributions include risk mitigation, market intelligence, supplier-led innovation and faster speed-to-market of finished products.”
Other key findings:
- Both organic and inorganic factors contributed to the growth in 2015; however, the organic activity (renewals, scope expansion) was subdued while inorganic activity (new deals) remained strong.
- Strong evidence of service provider switching was observed, with growing termination rates and a fall in contract renewals.
- Contractual activity rebounded in traditional industries such as manufacturing, consumer packaged goods (CPG) and retail.
- In 2015, market activity picked up in the Small and Medium Business (SMB) segment and the mid-market buyer segment.
- Adoption remained strong in North America.
- Increasing investment by service providers to enhance category expertise has resulted in buyers becoming more comfortable with outsourcing additional categories.
- The top five players (Accenture, Capgemini, GEP, IBM and Infosys) together account for more than 70 percent of the PO market.
- Accenture and IBM continue to lead the market in all geographies and in all major industry segments except healthcare and pharmaceuticals, where GEP commands the top position.
These results and other findings are explored in a recently published Everest Group report: “Procurement Outsourcing (PO) Annual Report – 2016 – Analytics and Beyond." This report assists key stakeholders (buyers, service providers, and technology providers) in understanding the changing dynamics of the PO market and helps them identify the trends and outlook for 2016-2017. The report provides comprehensive coverage of the global PO market including detailed analysis of market size and growth, buyer adoption trends, PO value proposition, solution characteristics and service provider landscape.
About Everest Group
Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empowers clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.
Andrea M. Riffle, Everest Group
Robert Cathey, Cathey Communications