Procurement Outsourcing - The Next Major BPO Growth Area? (Strategic Focus)

Table of Contents

OVERVIEW

• Catalyst
• Summary

KEY MESSAGES

• Growth expectations for the procurement outsourcing market are high
• Procurement outsourcing does not rely on labor arbitrage to deliver cost savings
• The procurement function is made up of three key processes
• The procurement outsourcing market is dominated by four vendors
• Most vendors aim to offer clients an end-to-end service

MARKET OPPORTUNITY

• Growth expectations for the procurement outsourcing market are high
  • Is the procurement outsourcing market expanding?
• Defining procurement outsourcing
  • The differences between direct and indirect spending
  • Why is indirect spending more commonly outsourced than direct spending?
• Procurement outsourcers operate across vertical markets
  • Most procurement outsourcing vendors target large organizations
• The US is by far the largest geographic market for procurement outsourcing

CUSTOMER IMPACT

• Procurement outsourcing does not rely on labor arbitrage to deliver cost savings
• The procurement function is made up of three key processes
  • Sourcing
  • Purchasing
  • Payment
• Clients are wary of committing to end-to-end procurement outsourcing
  • Many clients are currently focused on short-term objectives

COMPETITIVE LANDSCAPE

• The procurement outsourcing market is dominated by four vendors
  • The market leaders
• The other vendors in the market can be divided into two broad categories
  • Vendors with a sourcing background
  • Vendors with a transactional process background

GO TO MARKET

• Most vendors aim to offer clients an end-to-end service
• It will be difficult for new vendors to establish themselves in the market
  • Significant barriers to entry exist
• New technology continues to change how procurement services are delivered
• Recommendations
  • Focus on core competencies
  • Explore the opportunities available for partnerships
  • Develop a multi-shore delivery model
  • Maintain the focus on large enterprises

APPENDIX

• Methodology
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Details of 10 large procurement outsourcing end-users
• Table: Examples of recent partnerships in the procurement outsourcing market

FIGURES

• Figure: Market sizes of BPO functions, 2008 ($ billion)
• Figure: If you are engaged in BPO contracts, which functions do they cover?
• Figure: Number of procurement outsourcing contracts announced, 2004 - August 31 2009
• Figure: Total number of BPO contracts announced, 2004 - August 31 2009
• Figure: Breakdown of procurement outsourcing contracts by signing region
• Figure: Rate the importance of the following factors in your decision to enter into a BPO contract (1 - Least Important; 4 - Most Important)
• Figure: Vendor share of the procurement market by total contract value and number of contracts signed