Procurement Outsourcing (PO), a relatively nascent market in the BPO world, is poised for a landmark year in 2007, according to Everest Research Institute. PO expenditure has grown at over 35 percent in 2006 and represents an annual managed spend of nearly US$40 billion. Plus, PO buyers are realizing significant benefits. Phil Fersht, vice president of the BPO Research practice at Everest, offers Tekrati readers a preview of the indepth PO industry research his team will debut during a free webinar on December 13, 2006.

"We are very upbeat at Everest regarding the future potential of Procurement Outsourcing after some early challenges in this nascent market. Contract activity in PO this year has been much more dynamic," said Fersht. He noted that existing PO buyers have realized sourcing related savings of 5-20% on each category head, which translates into a significant bottom-line impact.

The Research Institute’s PO analyst team has been conducting major ongoing research of the service providers and buyers of PO offerings across multi-process procurement domains. The webinar will reveal preliminary findings from a forthcoming 2006-2007 PO report, including trends and dynamics from over 50 multi-process PO contracts. A small sampling of research highlights includes:

• Verticals: Manufacturing, Consumer Products, and Financial Services have led the charge over the last 2 years
• Geographies: Since 2005, Europe has witnessed substantial PO activity
• Suppliers: Accenture, IBM, ICG Commerce, and Ariba are the leading suppliers in terms of PO market share
• Spend categories: Based on actual PO deals tracked, nearly 65-80% of this indirect spend can be outsourced to an outsourcing supplier. This includes most indirect categories like offices supplies, MRO, advertising and promotion, IT, facilities, professional services, and HR services.

While labor arbitrage is the key lever that suppliers utilize in FAO, in PO the most important value creation lever is people expertise. "By asking an outsourcing provider to manage indirect spend, buyers gain access to category experts with sourcing expertise across indirect categories," Fersht explained. "While category expertise and market know-how for indirect categories is typically low for most buyers, we find that a top-notch PO provider would have nearly 16 category experts with six-plus-years experience on an average for each broad category head. (The average external spend managed for each category is around US$560 million). This kind of expertise is clearly something that an individual buyer cannot afford, and can only be gained through a Procurement Sourcing engagement with a supplier."

Webinar and registration information

The Everest Research Institute webinar, "Procurement Outsourcing 2007: A Market on the Rebound", reveals the latest research in PO, including trends and dynamics from over 50 multi-process PO contracts. It will include a 45-minute presentation from Phil Fersht, Vice President BPO Group, Everest Research Institute; Saurabh Gupta, Senior Research Analyst, Everest Research Institute; Mark Craddock, Engagement Director, Everest Group, as well as 15 minutes of Q&A for participants. Topics will include: The PO value proposition; PO market size and future direction; Buyer adoption trends; Current and evolving service provider landscape; PO pricing and contracting models.

The event will take place on December 13, 2006 starting at 10:00am CST (USA); 4:00pm (UK); 9:30pm (India). Enrollment is open and free, as of this posting.

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