Introduction

The Procurement Outsourcing (PO) market in 2007 continued on a growth path toward wider market adoption.  With the number of new contract signings in 2007 matching that of 2006, the PO market is moving closer to entering a “rapid growth” phase as 2008 unfolds. 

Several key dynamics took form in 2007, including:

• The emergence of a new PO value proposition representing the convergence of the traditional FAO and PO value propositions.
• Shifts in the competitive landscape in response to growing and morphing opportunities in the PO space
• Emerging buyer adoption trends around transactional PO, end-to-end processes, and “phased” engagements

In response to this increased market interest, suppliers continue to expand their capabilities in different ways and the market has even seen a few mergers and acquisitions. This report examines the global 2007 PO market and provides insights, detailed analyses and implications for stakeholders into 2008 and beyond.

Using a new definition for the market, this report analyzes the PO market from multiple dimensions, including by market size, buyer adoption, transaction characteristics, supplier landscape, and value proposition. This report will assist both companies considering outsourcing procurement to a third-party and suppliers of PO services to understand in detail how the market dynamics and value proposition for PO are evolving.

Scope

• Third-party PO contracts and does not include shared services or captives
• Multi-process PO contracts that involves outsourcing of three or more activities from the Source-to-Pay (S2P) process, with at least US$1 million of Annual contract value, and has a contract length of at least three years
• All multi-process PO contracts across all industries and geographies signed as of August 2007
• Suppliers with multi-process PO capability including Accenture, Ariba, buyingTeam, Capgemini, Corbus, DSSI, EDS, Genpact, HCL, HP,HPI, IBM , ICG Commerce, Infosys BPO, Newline Noosh, Provade, Vertex, Xchanging.

Contents

This report summarizes key market trends and insights to assist management in making more informed business decisions. Key Insights are divided into three categories: Market size and buyer adoption, transaction characteristics and value proposition, and Supplier landscape. Each category contains 3-4 key trends, which are discussed in detail (and illustrated with supporting data and analysis) to provide the reader information in easy-to-apply, bite-size pieces. For example, Market size and buyer adoption is sub-divided into the following:

• Market size and growth: The overall GAO market had a relatively flat 2007 and PO followed suit
• Buyer adoption trends:  The PO market is witnessing broad-based adoption across geographies, industries, and buyer segments
• Supply and demand constraints: Various demand and supply issues are holding back the market from more robust growth