Everest Group Study Predicts Strong 2012 for Procurement Outsourcing Market
According to a new research report from global consulting and research firm Everest Group, the multi-process Procurement Outsourcing (PO) market will grow about 15 percent and reach $1.8 billion in annual contract value in 2012, representing managed spending of about $220 billion.
The study, “Procurement Outsourcing Annual Report 2012 – The PO Market: Steadily Marching Forward,” also predicts that end-of-term activity will be significant since 57 percent of PO contracts are up for renewal within the next four years.
The report also suggests that adoption will be led by companies with revenues over $1 billion, while adoption by the small- to mid-sized businesses (SMB) segment will remain sporadic and adoption in the public sector is expected to grow.
Lastly, geographic adoption is expected to expand in global contracts and adoption by source geographies like Asia-Pacific and South America.
This is largely all based off of the data gathered for 2011, which shows that the PO market experienced its second consecutive record year for new contracts and extensions as a record high of 60 new multi-process PO contracts were signed.
2011 also saw annual contract value grow 14 percent to reach $1.6 billion, while cumulative total contract value for engagements new and existing reached $11 billion, marking an increase of 17 percent from 2010.
“For the second consecutive year, we’ve seen the PO market set record numbers for new deals, renewed contracts and a significant rebound in mid-market adoption,” said Saurabh Gupta, vice president at Everest Group. “Spend reduction, process optimization and compliance remain the primary drivers for PO adoption. The business case is attractive as it can address a cost base representing five to 15 percent of the company revenue compared to 0.5-1.5 percent for most other BPO (business process outsourcing) opportunities. Thus, a five to 10 percent cost reduction represents a significant return on investment.”
Everest Group’s analysis includes multi-process PO contracts with a minimum of three procurement processes over $1 million in annual contract value for a minimum term of three years. The company also predicts that the Finance & Accounting Outsourcing market will also make big gains this year.
Edited by Braden Becker