Introduction

The value proposition of Procurement Outsourcing (PO) is centered around spend-related savings and not labor arbitrage. Consequently, the degree of offshoring in PO contracts is only around 25% – less than half of the typical offshore component in other outsourcing markets like Finance & Accounting Outsourcing (FAO). However, more recently we are witnessing increasing levels of offshoring in PO contracts, as global sourcing has the potential to become a significant enabler for outsourcing procurement by providing additional levers for managing the operational costs. This report examines the key trends emerging in the offshore PO market. The study is focused on offshore adoption in PO, role of global sourcing in PO, and offshore supplier landscape. This report will assist both companies considering outsourcing procurement to a third-party and suppliers of PO services in decisions related to global sourcing in an outsourcing procurement.

Scope 

• Third-party PO contracts and not shared services or captives
• Multi-process PO contracts that involve outsourcing of three or more activities from the Source-to-Pay (S2P) process with at least one activity each from Sourcing and Procure-to-Pay (P2P), addresses at least US$150 million of managed spend, and a contract length of at least three years
• All multi-process PO contracts signed as of August 2007

Contents

This report summarizes key market trends and insights to assist management in making more informed business decisions. Key insights are discussed in detail (and illustrated with supporting data and analysis) to provide the reader information in easy-to-apply, bite-size pieces. The report provides implications for buyers and suppliers of PO and discusses the following themes:

• Offshore adoption in PO has been low but is on the rise
• Role of global sourcing is expanding in the PO market as it provides additional levers to manage operational costs
• The emerging trends in global sourcing are a key determinant in the evolution of the PO supplier landscape