Will exceed USD 380 million in 2006, according to a new study from the Everest Research Institute
Purchasing outsourcing will exceed USD 380 million in 2006, according to a new study from the Everest Research Institute
Rapidly growing market that is gaining traction, with the potential to achieve savings of up to nearly 400% compared to other segments of the business process outsourcing market
NEW YORK and DALLAS, 12 dcembre 2005 – The USD 297 million multi-process outsourcing (PO) sector is growing by 30% per year and will exceed USD 380 million in 2006, according to new results from the Everest Research Institute, with the potential to grow into a multi-billion dollar market over time. Procurement outsourcing refers to the complete or partial transfer of business processes, infrastructure and resources associated with the purchase of all indirect costs, including contracted services, from a company to a third-party provider.
Everest Research Institute's Procurement Outsourcing annual report, released today, focuses on the emerging market for multi-process outsourcing transactions, in which a combination of three or more procurement processes, such as strategic sourcing, supplier management, day-to-day procurement and accounts payable, are outsourced. The multi-process outsourcing market currently represents a spending base of USD 25 billion, according to Everest analysis.
”Procurement outsourcing has the potential to become the biggest ‘change maker’ in business process outsourcing,” said Michel Janssen, Responsible Research Director at Everest Research Institute. ”Our findings indicate that procurement outsourcing will achieve savings five times higher than other areas of outsourcing, including HR, IT and offshore outsourcing, generating a potential bottom line savings of up to 2% of revenue.” Unlike other areas of outsourcing, the study found that procurement outsourcing does not depend on arbitrage of labor costs or scale to be profitable. “Purchasing outsourcing depends on industry and functional expertise, with savings coming from smarter sourcing decisions, effective relationship management and compliance with legal compliances,” added Janssen. The Everest report found that the multi-process outsourcing market is starting to gain traction and heading towards a faster growth phase as buyers and suppliers test the waters. The main findings indicate that:
- Procurement outsourcing is currently a buyer's market – Business outsourcing buyers should be able to negotiate very favorable terms at this early stage in the market's evolution. They are positioned to become anchor clients for prominent outsourcers, such as IBM, Accenture, Ariba and ICG Commerce, all of which are expanding their outsourcing capabilities and together represent 80% of the procurement outsourcing market.
- Suppliers must develop global capabilities – Global procurement outsourcing transactions have increased 15% to 44% over the past two years as multinational buyers look to extend the benefits of procurement outsourcing to their global operations. Suppliers are expected to leverage flexible, virtual shared capabilities to serve key geographies.
- Investors should approach the procurement outsourcing market with a long-term view – Procurement outsourcing, with significant untapped potential and no clear winners, is expected to enter a rapid growth phase over the next two years. With current market penetration below 1%, Everest expects the procurement outsourcing market to continue to offer increasing investment opportunities and returns in alignment with industry growth.
”Outsourcing procurement speaks directly to the bottom line and is a high-impact decision,” Janssen said. ”It offers great opportunities for partners to share the gains, which many are embracing. But its transition to a rapidly growing market will depend on the ability of suppliers to create an efficient marketplace, integrating sourcing expertise and niche technology with broader outsourcing experience.”
About the Everest Research Institute
Everest Research Institute (www.everestresearchinstitute.com) serves as a central source of strategic intelligence, analysis and actionable insights for enterprise buyers, service providers and investors in the marketplace global in business process outsourcing and information technology outsourcing. The Institute is committed to providing the global outsourcing community with the information it needs to create highly productive outsourcing relationships and programs, focusing on the drivers that continually shape the industry landscape and analyzing their impact on member organizations and the success of their outsourcing strategies. The Institute's distinguished Advisory Board, comprised of senior executives and leading thinkers in global outsourcing, oversees the Institute's research agenda to ensure it fully supports the business information needs of business buyers, service providers and investors. Everest Research Institute members benefit from unique, highly personalized analytical and advisory services not available elsewhere, including:
- Unlimited Access to Analysts – In addition to a full strategic planning session for in-depth face-to-face discussions, Everest analysts are available for ongoing consultation to address immediate member questions and concerns. Such access is unprecedented in the industry and gives members a distinct competitive advantage as they seek to take advantage of emerging opportunities, changing market conditions and unforeseen developments.
- Visionary research with actionable insights – Members receive in-depth reports on key outsourcing topics, complemented by quarterly updates and monthly research briefs on market-shaping events, including regulatory developments, technological advancements, and emerging sources of risk and value. These forward-looking reports not only cover important trends and developments, but also project future scenarios and the results of outsourcing decisions made today. This comprehensive interpretation of data provides members with actionable insights to support decision-making.
- Wealth of knowledge and experience – Members benefit from the business expertise and insights that come from Everest's direct involvement in structuring and negotiating over 530 IT outsourcing and business process outsourcing transactions and over 800 best practice case studies. Everest analysts have intimate knowledge of the strengths and weaknesses of service providers across different markets, processes, industries and geographies. They also have a first-hand understanding of how buyers approach the supplier selection process and ultimately what factors are critical to outsourcing success. Additionally, the Institute leveraged multiple market sources and collected proprietary information to assemble the most comprehensive database in the industry.
Everest Research Institute was established by the Everest Group, which provides strategic consulting services helping businesses harness the power of outsourcing. Since its founding in 1991, the Everest Group has served as business advisors for hundreds of IT and business process outsourcing transactions worldwide.
