Buyers Look Beyond Cost and Seek New Sources of Value in Procurement Outsourcing | Press Release

Specialists and India IT+BPO service providers drive growth; technology remains top investment priority. 

DALLAS, JULY 20, 2015 — The global multi-process Procurement Outsourcing (PO) market maintained its robust momentum and recorded a sturdy growth of 12 percent in 2014, reaching US$2.2 billion in size.

The value proposition of PO evolved in 2014: While cost and spend reduction are still important, buyers are increasingly seeking new value metrics, such as operational excellence, market intelligence, and supplier relationship management. As a result, the solution characteristics of PO contracts are shifting to a cost+value model.

These results and other findings are explored in a recently published Everest Group report: Procurement Outsourcing (PO) Annual Report — The Dawn of a Transformational Era.

The PO market is highly consolidated with the top five players commanding nearly 75 percent share of market. Nevertheless, as the PO market expands, competition among service providers is intensifying.

“Procurement specialists and India IT+BPO players have rapidly increased their share at the expense of global majors and will be the drivers of future growth, which we estimate will be between 10 and 12 percent in 2015,” said Swapnil Bhatnagar, practice director at Everest Group. “We also predict that service providers will continue to invest more in technology, particularly in three areas: end-to-end platforms, analytics, and automation.” 

Other key findings:

  • Average deal size dropped in 2014 due to a high number of small-value deals signed.
  • Geography-wise, adoption was led by North America (primarily the United States) in 2014.
  • The scope of new PO engagements is increasingly becoming end-to-end (i.e., Source-to-Pay focused) as buyers look to maximize savings.
  • The role of technology is growing in PO, with an increasing adoption of end-to-end platform-based offerings, mirroring the expansion of process scope. Key drivers include As-a-Service models, advanced analytics, mobile-enabled technologies, and process automation.
  • Offshoring continues to rise in PO contracts, rising faster in Procure-to-Pay focused contracts than in Source-to-Contract focused contracts.
  • Pricing structures of PO contracts are turning predominantly hybrid, with significant inclusion of incentive-based mechanisms. 

***Download Complimentary 13-page Preview Report Here*** (Registration required.) This preview summarizes the report methodology, contents and key findings and offers additional resources for further study.

The full report analyzes the procurement outsourcing market, focusing on:

  • Market size and growth
  • Buyer adoption trends
  • Value proposition
  • Solution characteristics
  • The outlook for 2016
  • Service provider landscape

*** Download Publication-Quality Graphics ***

High-resolution graphics illustrating key takeaways from this report can be included in news coverage, with attribution to Everest Group. Graphics include:

  • Unlocking strategic value in procurement: Empower suppliers
  • The PO Value Proposition: Transitioning from Cost to Cost+Value

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