TPI, a unit of Information Services Group, announced today that it has sponsored a new benchmark report, "Procurement Outsourcing: A Strategic Imperative," published by the Aberdeen Group, a Harte-Hanks company. The report incorporates the insights of procurement executives from more than 260 enterprises. It is intended for organizations looking to improve the strategic value procurement functions can provide -- reaching beyond tactical, cost-cutting benefits. Free report, as of this posting.

While some hesitancy to adopt procurement outsourcing continues to exist, stemming from a perceived loss of control, challenges related to quantifying benefits and/or a belief that procurement is a core competency, the findings indicate that 40 percent of enterprises are expected to be engaged in some level of procurement outsourcing in the next two years. Organizations wishing to expand their global service delivery capabilities and the process rigor involved in procurement are some of the reasons for this expected growth. Procurement outsourcing is also becoming more attractive to enterprises as service providers can also offer labor arbitrage and core competencies in transaction and process management capabilities, which often are difficult and expensive to sustain internally. The potential return on investment for adopters points to procurement outsourcing increasingly becoming a viable strategy for operational process improvement.

The report reveals that top-performing enterprises are more likely to adopt procurement outsourcing. This can be attributed to the fact that these companies are proficient in measuring the gaps between their current procurement performance and where they could be through strategic actions by leveraging scale, analytics, automation and supply chain expertise. In addition to realizing 28 percent improvements on their procurement cost savings, these organizations are gaining key strategic advantages such as streamlining business processes and improving operational performance overall.

“Benefits gained from procurement outsourcing derive from tactics well beyond labor arbitrage, and therefore the proposition is often misunderstood by both procurement and outsourcing practitioners, resulting in a much slower rate of adoption than other forms of outsourcing. However, of all forms of outsourcing, procurement outsourcing, because it can have an impact on 25-50 percent of the expense base of a company, has the potential to drive some of the most dramatic bottom-line benefits to corporations,” said Bill Huber, director, TPI. “We supported this project because it provides clarity on the paradigm shift occurring in procurement outsourcing and a solid benchmarking process for organizations to use when evaluating their own procurement models.”

“Our research has discovered that top-performing enterprises are more likely to leverage third-party expertise in the form of outsourcing,” said Bill Browning, research analyst, Aberdeen. “These companies are realizing strategic benefits such as gaining service provider and market intelligence, and streamlining operations, while also delivering cost and process savings.”

The report also recommends that enterprises considering procurement outsourcing should start by carefully evaluating current process and technology capabilities to establish a baseline and identify the spectrum of potential benefits through outsourcing. After that crucial groundwork is laid, organizations can focus on the strategic advantages that can be gained in addition to the tactical, cost-cutting results.

About this study

Visit TPI to download a free copy of the Aberdeen Group report, "Procurement Outsourcing: A Strategic Imperative." No registration is required.

The report details how best-in-class enterprises are shifting the procurement outsourcing paradigm from one that focuses on tactical, cost-cutting benefits to one driven by the strategic advantages of utilizing a third-party expert.

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