Outsourcing market sees growth leap

14 December 2005
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14 December 2005 | Anusha Bradley

Procurement outsourcing is growing at a rate of 30 per cent a year and will be a £220 million market in 2006, researchers claim.

Procurement Outsourcing - Annual Report 2005, published this week by outsourcing advisory firm Everest Research Institute, says the market is on the "cusp of its next growth phase" from which buyers can benefit.

It comes as big outsourcing deals were announced by IBM and Accenture this week. IBM has signed a five-year contract to manage the strategic sourcing and procurement of indirect materials and services for Unilever's North American operations. The Bank of Ireland said it had appointed Accenture to provide procurement and training services over the next seven years.

The Everest study analysed 38 global indirect spend procurement outsourcing contracts, and found that, while the market is still in its early stages, suppliers are expanding and buyers that move quickly can capitalise on competitive deals as a result.

"Buyers should be able to attract very positive deals at this early stage of market evolutions, acting as marquee clients for prominent outsourcers such as Accenture, IBM, Ariba and ICG Commerce," it concluded.

These companies represent 80 per cent of the market, but all providers are expanding outsourcing capabilities to meet demand.

Stephen Dunn, Everest's UK principal, said the growth was happening because outsourcing procurement can deliver savings to a firm's bottom line and increase its market value.

While outsourcing procure-to-pay systems can save up to 15 per cent on costs, outsourcing the entire management of an indirect spend category's sourcing to pay process can save up to 85 per cent.

"The savings in procurement outsourcing derive from smarter sourcing decisions, effective relationship management and contract compliance," he added.

Everest tracked 70 outsourcing suppliers and found procurement now accounts for almost 10 per cent of the total £1.76 billion market.


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