Banking PO will rise

15 July 2009

23 July 2009 | Jake Kanter

There is set to be a rise in procurement outsourcing (PO) in the financial services sector as companies restructure and emerge from the economic crisis.

Katrina Menzigian, vice-president at the Everest Research Institute, told SM: "As the financial services industry regains a little comfort, they are going to deal with cost issues. When they're done stomping out the big [financial] fires, they will think about how to run their companies better."

Firms in the sector will come under "substantial" cost pressure and will consider PO as a means to make savings, she said.

"Financial services companies are realising the tremendous potential that can arise from procurement outsourcing." Menzigian said the organisation anticipated a "pick-up in PO activity in the first half 2010".

She was speaking as Everest unveiled its study on 2008 PO activity in the financial services sector. Spend on new PO deals continued to rise last year, but at a slower rate than in 2007. There was also an increase in contract extensions, as companies looked to secure more from existing deals.

Nearly 70 per cent of PO contracts have an offshore element, with firms looking to make savings by outsourcing more transactional procurement to countries like India.

Banking companies are already the biggest adopters of PO, with giants such as Deutsche Bank tied into significant deals. Accenture is the dominant PO supplier to the industry, with nearly a 95 per cent market share.

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