Outsourcing boom

4 January 2007
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04 January 2007 | Paul Snell

There will be a great rise in the procurement outsourcing market in 2007, experts have predicted.

A study by the Everest Research Institute suggests the number of procurement outsourcing deals signed has now reached a "critical mass" that will see the market expand rapidly over the next 12 months.

"This outsourcing market is on the cusp of the emerging rapid growth stage," said Saurabh Gupta, senior research analyst at Everest.

Although procurement outsourcing began at the same time, other business process outsourcing (BPO) markets, such as HR and finance & accounting, have grown faster. Gupta said this was because procurement outsourcing was seen as more challenging.

However, 75 per cent of all procurement outsourcing contracts have been signed since 2003. Gupta said one factor for the increase was senior executives' realisation of the importance of the function.

The manufacturing and retail sectors are leading the growth because of the huge pressure to reduce costs and optimise supply chains and logistics. The European market was described as "red-hot", catching up with North America, traditionally the stronghold of procurement outsourcers, in terms of market share.

The experts also warned, however, that there were only four suppliers; IBM, Accenture, Ariba and ICG Commerce, able to provide a full "source-to-pay" process, including day-to-day purchasing, supplier management and strategic sourcing.

The group also said foreign providers, such as Wipro in India, were also set to expand in 2007.

See news focus and 2007 predictions feature

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