A majority of savings in PO is derived from procurement spend reduction and compliance. This only now is becoming efficiently enabled by indirect category expertise and access to new technologies that service providers are now beginning to invest in.
Dallas, Texas (PRWEB) June 26, 2013
The Procurement Outsourcing (PO) market is poised for continued double-digit growth as investments in new technologies and buyer appreciation for the unique challenges of PO emerge, according to a new research study by Everest Group, an advisory and research firm on global services.
Since 2007, the PO market has maintained an 18 percent compound annual growth rate in terms of Total Contract Value (TCV), and service providers are embracing expertise and technology driven strategies to maintain that double-digit pace.
To draw higher value from second and third generation PO engagements, traditional penetration models such as increasing the depth and breadth of service coverage are being augmented by new modes of scope expansion, including expansion into other geographies and/or business units, downstream F&A processes and adjacent supply chain activities.
The report, Procurement Outsourcing Annual Report, presents in-depth information on deal volume, contract value, service provider strategies and trends driving the market. Key topics include:
- The PO market grew at 10 percent in 2012, reaching US$1.72 billion in annualized contract value representing US$220 billion in terms of managed spend.
- Consumer goods and manufacturing continue to be the largest adopters of PO. Adoption in financial services and hi-tech & telecom increased significantly in 2012.
- Contracts serving buyers in multiple continents are on the rise. Thirty-eight percent of the new TCV signed in 2012 has a global spread.
- The drivers for PO vary by process scope. Spend reduction is the main driver for outsourcing upstream sourcing activities while operational cost reduction is the main driver for the more transactional Procure-to-Pay scope.
- Starting a PO relationship with spend analytics is an increasing trend. Analytical tools are also being leveraged for minimizing payment errors and improving planning/forecasting.
- While PO continues to focus on indirect spend, inclusion of direct spend category has witnessed significant increase. Consequently, outsourcing Maintenance, Repair Overhaul (MRO) spend and tail-end spend is on the rise.
- IBM and Accenture continue to lead the PO market with more than 50 percent market share (by ACV).
- Accenture, GEP, IBM, Infosys, Procurian, and Xchanging, accounted for nearly 90 percent of the TCV added in 2012.
“Arbitrage-led operating efficiencies account for only 15-20 percent of the overall savings potential from PO,” said Saurabh Gupta, vice president at Everest Group. “A majority of savings in PO is derived from procurement spend reduction and compliance. This only now is becoming efficiently enabled by indirect category expertise and access to new technologies that service providers are now beginning to invest in. With the success and growth that PO has had over the last few years, it provides new lessons in value creation to the entire BPO industry.”
For more information about the report, Procurement Outsourcing Annual Report, or other research services, please visit research.everestgrp.com, e-mail info(at)everestgrp(dot)com or call +1-214-451-3110.
About Everest Group
Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations and private equity firms, in six continents across all industry categories. For more information, please visit http://www.everestgrp.com and research.everestgrp.com.