Nearshore Americas

Procurement Outsourcing on the Rise in Asia and Latin America

The global multi-process Procurement Outsourcing (PO) market registered 12% growth in 2013, according to research firm Everest Group. The PO market has tripled in share in the last three years, widening its footprint significantly in the emerging markets of Asia Pacific and Latin America.

Collaboration between HR and procurement is on the rise, with nearly 75% of the contracts having HR-related categories in 2013, compared to 67% previously.

Accenture is the market leader, controlling nearly one-third of the market share. The outsourcer’s market share rose significantly after it acquired Procurian for US$375 million last year.

Analysts say the PO market is highly consolidated, with five players – Accenture, IBM, Xchanging, GEP, Capgemini – commanding more than 70% of the market share.

“The market is currently in a state of flux, with record new deal signings and record number of terminations, simultaneously. Such volatility, attributed to switching of service providers, is an indication of reducing stickiness,” stated the research firm.

According to the report, deal metrics remained broadly in line with the past trends, however, the average deal size and term rose marginally during the year. Around 550 multi-process PO deals were signed in 2013, with a minimum of three PO processes valuing over US$1 million and a minimum contract term of three years.

While the value proposition of PO remains primarily driven by cost and spend reduction, new themes, such as category expertise, access to technology, and integrated view/governance, are also emerging. Furthermore, PO is moving beyond its traditional borders, as seen by its continuous merger with finance and accounting, greater penetration into supply chain processes, and higher collaboration with human resources.

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Everest Group has predicted that the market will expand to US$275 billion in spend and reach US$2.2 billion  in annualized contract value this year.

Narayan Ammachchi

News Editor for Nearshore Americas, Narayan Ammachchi is a career journalist with a decade of experience in politics and international business. He works out of his base in the Indian Silicon City of Bangalore.

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