Transaction costs drive procurement outsourcing

30 November 2007
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30 November 2007 | Antony Barton

Procurement at 40 per cent of companies will be outsourced in the next two years, according to a new report.

Research from the Aberdeen Group reveals 27 per cent of firms say they currently outsource all or part of their procurement and 13 per cent say they have plans to outsource. The top driver for procurement outsourcing is the pressure to lower procurement transaction costs, followed by increased global competition.

The third reason is the need to gain access to improved pricing, with pressure to re-focus personnel on more strategic activities coming fourth.

The findings also reveal CPOs are nine times more likely to outsource their procurement in increments, based on process or spend category, rather than in its entirety.

Best-in-class (BIC) companies, however, are more than twice as likely to outsource all their procurement than other firms, with 22 per cent of BIC firms choosing this strategy as opposed to 9 per cent of others.

Aberdeen categorised BIC firms on criteria that included the standardisation and scope of their procurement processes, the skills of the buying team and the visibility of spend data.

The survey covers more than 260 companies from around the world, with procurement professionals comprising 49 per cent of respondents.


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