Australia and NZ slow to take up outsourcing

2 July 2008
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03 July 2008

Decentralised purchasing and a lack of scale and experience are hampering the growth of procurement outsourcing (PO) in Australia and New Zealand.

An examination of the PO market in both countries by the Everest Research Institute (ERI) found local buyers were conservative in their approach to outsourcing because few deals have been signed and they had concerns about the negative connotations associated with the process.

The "size of the prize" was also an issue for providers. ERI estimated that the average procurement spend at an Australian manufacturing company was around AUS$900 million (£435 million) and that only around AUS$200 million

(£97 million) was available to be outsourced - with most global providers looking to target spend of more than £121 million.

The decentralised nature of procurement also caused problems, with half of firms having less than 20 per cent of their total spend centralised, leading to a lack of visibility and different expectations of stakeholders.

However, the study also identified factors that are driving PO, including easier access to talent in a tight market and the latest technology, increased spend visibility and savings to combat rising business costs.

"The record low unemployment rate in the two countries combined with rising wages of procurement professionals and increasing competitive pressures is making organisations seriously evaluate PO as an option," said Saurabh Gupta, research director at ERI.

SMjul2008

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