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20 May 2012 | Adam Leach
The amount of global outsourced procurement deals and the value of them have both increased for the second year straight.
Procurement Outsourcing Annual Report 2012 – The PO Market: Steadily Marching Forward, published this week by Everest Group, said the cumulative value of contracts increased by 17 per cent to reach $11 billion (£7 billion). It attributed this to an increase in the average contract value and continued adoption by mid-size companies - those with revenues between $1-$5 billion (£600 million – £3.2 billion).
Saurabh Gupta, vice president, Everest Group, said: “For the second consecutive year, we’ve seen the procurement outsourcing (PO) market set record numbers for new deals, renewed contracts, and a significant rebound in mid-market adoption. Spend reduction, process optimisation and compliance remain the primary drivers for PO adoption.”
The study found that companies in the manufacturing, consumer packaged goods and retail, and financial services accounted for around 80 per cent of the total value of deals signed in 2011. It also identified an increasing trend in finance and accounting outsourcing with accounts payable being outsourced.
According to Everest, next year will see a third consecutive year of growth. It forecasts the total value of contracts for procurement outsourcing will increase by $200 million (£126 million), totaling $1.8 billion (£1.1 billion), with around $220 billion (£139.1 billion) of spend being put in the hands of providers. It also said that smaller companies would lead the growth.
The study also forecast growth in the amount of procurement being outsourced from the public sector and that the geographical spread of outsourcing will grow. It predicted that more companies in the Asia-Pacific and South American continents will outsource more procurement.