The multi-process Procurement Outsourcing (PO) market witnessed increased activity in 2009 with the number of new contract signings and extensions increasing 30 and 90 per cent, respectively, compared to 2008, new research reveals.
According to the Procurement Outsourcing Annual Report 2010 by Everest, a consulting and research firm, the PO market will grow in excess of 20 per cent in 2010 and reach nearly $1.3bn in annual contract value (ACV) that represents a managed spend of nearly $170bn.
The study noted that, in 2009, the PO market witnessed increased levels of interest and market activity, but average contract values dropped due to conservative buyers signing smaller contracts because of the prevailing uncertain economic conditions. However, in the longer term, Everest expects these buyers to grow the scope of their PO engagements and in turn fuel future market growth.
As the global economy revives, Everest predicts that end-of-term activity will pick up over the next three years involving a book of business valued at $2.2bn.
It also forecasts that buyers will favour 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 in last year’s down economy were averse to risk and thus inclined to start small and adopt sourcing-centric approaches to generate quick savings,” said Katrina Menzigian, Everest vice president, BPO Research.
“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.”
According to Everest, suppliers Accenture, IBM and ICG Commerce together account for nearly 80 per cent of the overall market in ACV, but regional leadership positions continue to exist with players such as Xchanging and 4C Associates in the UK market. Other suppliers in the report analysis include buyingTeam, CapGemini, Corbus, DSSI, Genpact, Global eProcure, HCL, HP, Infosys BPO, TCS, Wipro and WNS. Emerging suppliers include Hubwoo, OPI, Steria and SureStock.
“We expect to see more suppliers enter the market as well as the continuing emergence of alliances and partnerships between procure-to-pay (P2P) and sourcing-focused suppliers to compete against global end-to-end S2P suppliers,” said Saurabh Gupta, Everest research director.
“While most suppliers are aspiring to build S2P capabilities, suppliers will continue to willingly undertake componentized engagements and allow buyers to pursue a phased sourcing approach.”