Procurement outsourcing market sees strong growth but is in ‘state of flux’, says Everest Group
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22 June 2014 | Gurjit Degun
The procurement outsourcing market saw 12 per cent year-on-year growth in 2013, and is expected to expand by between 10-12 per cent in 2014.
Research by Everest Group found last year that the market totalled $254 billion (£149 billion) of managed spend and $2 billion (£1.2 billion) in annualised contract value. In 2012, the market increased by 10 per cent.
For 2014, it predicts the market will expand to between $270 billion (£158 billion) and $275 billion (£161 billion) in spend, and reach $2.2 billion (£1.3 billion) in annualised contract value.
The Procurement Outsourcing Annual Report 2014: Expanding New Horizons also predicted the average contract size and term will “increase marginally” due to a rising number of large source to pay contracts.
The report added there will be more competition in the market. “While procurement outsourcing will still be led by Accenture and IBM, other players will increase their market share,” it said. Accenture's $375 million (£220 million) acquisition of Procurian last year has helped it climb to the top spot, gaining almost one-third of the procurement outsourcing market.
Everest Group said: “The market is currently in a state of flux, with record new deal signings and a record number of terminations, simultaneously. Such volatility, attributed to switching of service providers, is an indication of reducing stickiness.
“While the value proposition of procurement outsourcing 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, procurement outsourcing 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.”