Executive Summary

Procurement Outsourcing (PO) is steadily attracting more and more attention of the outsourcing community, given its ability to provide a combination of business benefits including direct-cost savings, business impact, and strategic impact. In response to this new level of market awareness, a diverse base of buyers, suppliers, and technology providers are entering the PO market. At the same time, established PO players also are investing in building capability to enhance their existing PO offerings.

The evolving dynamics of the PO market are changing the nature of the PO contracts. Based on its annual PO data collection exercise conducted in August 2007, Everest Research has observed fundamental shifts in market characteristics along the following dimensions: 

1. The sourcing approach in PO is changing from a “big-bang” approach to a “phased” approach
2. The traditional PO value proposition is converging with the traditional finance and accounting outsourcing (FAO) value proposition
3. The PO supplier landscape is expanding

In order to enhance its ability to track the various trends emerging in the PO market, and given the current direction of those trends, Everest Research Institute has updated the definition it uses to track the PO market. These definitional changes reflect the current direction of the PO market and are detailed in this whitepaper.

This paper discusses:

• The evolving dynamics of the PO market and the need for a new PO definition
• The new PO market definition
• The key impact of the new definition on Everest PO Research