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Procurement Outsourcing Market to Grow this Year

by: Karen Cayamanda

Friday, March 19, 2010 |

Procurement Outsourcing Trends

Procurement outsourcing (PO), in simple terms, means transferring procurement (acquisition of goods and services) tasks to a service provider or third party to cut costs and/or enable the buyer to focus on its core competencies.

This year, it looks like IT outsourcing is not the only one that is likely to see improvement in outsourcing market activity. According to the Procurement Outsourcing Annual Report 2010 by global consulting and research firm Everest, PO activity will increase by more than 20 percent this year. The annual contract value (ACV) is expected to reach almost US$1.3 billion. This can be attributed to the increase in new contract signings and extensions this year, as well as the improvement in global economic conditions.

Here are Everest’s projections on the PO market:

•    End-of-term activity will pick up over the next three years involving a book of business valued at US$2.2 billion.

•    The small/medium-sized business (SMB) segment will see higher adoption levels of single-process PO contracts but will be targeted by suppliers offering new platform-based offerings, including Software as a Service (SaaS) as a delivery model.

•    Buyers will favor PO contracts that are either transaction-focused or sourcing-focused engagements, and most buyers will follow a phased approach with an end vision of source-to-pay (S2P).

“Buyers are now poised to expand sourcing-focused contracts into transactional services. Contracts that exploit the synergies between Finance and Accounting Outsourcing (FAO) and PO, especially in the procure-to-pay areas, will see increased market traction,” said Katrina Menzigian, Vice President, BPO Research.

As the economy recovers from the crisis, 2010 is likely to be a better year for the global outsourcing industry. Let’s just hope that recovery will continue and significant results will be seen throughout the year.

 

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