IDC Study Predicts Worldwide Procurement BPO Market To Increase 15.2% To Reach $12 Billion by 2007
FRAMINGHAM, MA – DECEMBER 17, 2003 – Although a relative newcomer to the business process outsourcing (BPO) world, the procurement function holds promise for BPO adoption over the next 12 months, a new report from IDC reveals. IDC's study indicates that current adoption of procurement BPO is discrete in nature and will continue to be so over the next year. Interest in outsourcing procurement activities and sub-segments is strong, particularly among large companies with over $1 billion in revenue. However, interest is also mainly for small-scale engagements, and the overriding goal for procurement BPO is still that of cost management. IDC estimates that the worldwide procurement BPO market was $5.9 billion in 2002 and expects the market to increase at a five-year compound annual growth rate (CAGR) of 15.2%, to $12 billion by 2007.
"There is a definite surge in interest in procurement BPO in today's business climate,” said Romala Ravi, program manager, Supply Chain, PLM, and BPO Services. “At the same time, companies are mostly interested in ‘testing the waters’ and taking ‘baby steps’ with their procurement BPO engagements. The path to success in the procurement BPO market will be fraught with a mix of opportunities and challenges, necessitating focus, patience, and long-term commitment on the part of procurement BPO providers."
To compete in this market successfully, IDC believes that procurement service providers should take the following actions:
• Grab low-hanging fruit first and grow from there – the market is not ready for comprehensive procurement BPO so pitching this will only delay the securing of deals.
• Use the sourcing sub-segment as a stepping stone as this is the sub-segment most poised for growth in BPO adoption over the next year.
• Take time to identify relevant trigger events for procurement BPO adoption and match these up against your strengths to identify which deals you should be going after and what levers of influence to use.
• Understand the difference between "deal-clinchers" and "must-haves" because the two can be very different – demonstrating the right capabilities at the right time will help secure the deal.
This IDC study, Worldwide and U.S. Procurement BPO Forecast and Analysis, 2002-2007 (IDC #30505), presents the annual update to the five-year forecast for the worldwide market for procurement BPO services. The purpose of this document is to identify and quantify the effects of recent trends and events influencing the procurement BPO services opportunity through the third quarter of 2003 and their impact on the five-year forecast.
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