PROCUREMENT OUTSOURCING MARKET ANALYSIS

Global procurement outsourcing market size is estimated to be valued at US$ 5.15 billion in 2023, and is expected to exhibit a CAGR of 11.7% during the forecast period, reaching US$ 11.17 billion by 2030.

Global procurement outsourcing market growth is being driven by a number of factors including increasing digitization of procurement processes, growing need for cost savings, and increasing focus on strategic procurement.

The digitization of procurement processes makes it easier for companies to outsource their procurement functions. This is because digital procurement platforms allow companies to connect with suppliers, manage contracts, and track spending more efficiently.

Global Procurement Outsourcing Market- Regional Insights

• North America (40%): North America is the largest market for procurement outsourcing, followed by Europe and Asia Pacific. The growth of the market in North America is being driven by increasing digitization of procurement processes, growing need for cost savings, and increasing focus on strategic procurement.
• Europe (23%): The growth of the market in Europe is being driven by similar factors, as well as the increasing adoption of procurement outsourcing by small and medium-sized enterprises (SMEs)
• Asia Pacific (20%): The growth of the market in Asia Pacific is being driven by growing manufacturing sector, the increasing adoption of procurement outsourcing by SMEs, and the growing focus on strategic procurement by large enterprises 

Figure 1. Global Procurement Outsourcing Market Share (%), By Region, 2022

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Analyst Viewpoint:

• Global procurement outsourcing market is expected to witness growth in the near future. Businesses are increasingly outsourcing procurement functions to specialized third-party service providers to gain cost efficiencies and access strategic sourcing expertise. This trend is expected to boost the market expansion. The advances in AI and analytics are allowing outsourcing firms to optimize supply chains and negotiate better contracts. These provide scale and resources that many in-house procurement teams lack. However, long-term contractual obligations and switching costs remain a concern for some clients. Data security is another key challenge as sensitive information moves outside companies.
•  North America currently dominates the market, owing to high business activity and an accessibility to outsourcing non-core operations. Meanwhile, Asia Pacific is anticipated to be the fastest growing regional market as companies in developing economies like China and India outsourcing procurement focuses on their core businesses amid growing economic complexity. However, market growth could be hampered if macroeconomic conditions deteriorate and negatively impact corporate spending. Overall, as companies seek to streamline noncore functions and leverage external expertise, outsourcing procurement is expected to continue to grow Outsourcing giants may also expand through targeted acquisitions to enhance their service portfolio and geographic footprint.

Global Procurement Outsourcing Market- Drivers

• Cost Reduction: One of the primary drivers of global procurement outsourcing market is the potential for cost reduction. By outsourcing procurement processes to specialized service providers, companies can achieve economies of scale, reduce overhead costs, and leverage the provider's expertise to negotiate better pricing and terms with suppliers. This can lead to significant cost savings for organizations.
• Focus on Core Competencies: Outsourcing procurement allows companies to focus their internal resources and expertise on their core competencies and strategic initiatives. By delegating non-core procurement activities to external experts, organizations can redirect their attention to areas that directly contribute to their competitive advantage and value proposition.
• Access to Specialized Expertise: Procurement outsourcing providers possess specialized knowledge, tools, and best practices in procurement processes. These stay updated with market trends, supplier capabilities, and industry regulations. By partnering with these providers, companies gain access to this expertise, enabling them to improve their procurement operations, enhance supplier relationships, and stay competitive in the market. For Instance, TCS emerged as a Leader in Everest Group’s 2021 Procurement Outsourcing (PO) Services PEAK Matrix Assessment due to its holistic portfolio of service offerings and capabilities across the procurement value chain supported by its strong technology capabilities and consulting/advisory practice,” said Shirley Hung, Partner, Everest Group.
• Enhanced Efficiency and Productivity: Outsourcing procurement processes can lead to improved efficiency and productivity. Dedicated procurement service providers often have streamlined processes, advanced technology platforms, and automation tools that enable faster and more accurate procurement operations. This efficiency can result in shorter procurement cycles, reduced lead times, and improved overall productivity for organizations.

Global Procurement Outsourcing Market- Opportunities

• Strategic Sourcing and Category Management: Strategic sourcing and category management are crucial for organizations to optimize their procurement processes and achieve cost savings. Procurement outsourcing providers can offer specialized expertise in these areas, helping companies to develop strategic sourcing strategies, conduct market analysis, identify potential suppliers, negotiate contracts, and manage supplier relationships. The market opportunity lies in partnering with organizations to improve their sourcing capabilities and boost cost efficiencies. For Instance, Coupa the cloud based Business Spend Management platform that allows organizations to manage business spend across Procurement, Supply Chain & Finance.
• Digital Transformation and Technology Adoption: Global procurement outsourcing market can capitalize on growing demand for digital transformation and technology adoption in procurement functions. Organizations are increasingly seeking providers that can offer advanced technology platforms such as AI-powered analytics, RPA, blockchain, and cloud-based procurement systems. Service providers can seize this opportunity by delivering innovative solutions that enhance automation, data analysis, and process efficiency in procurement operations.
• Supplier Relationship Management: Effective supplier relationship management (SRM) is crucial for organizations to build strong partnerships, drive supplier performance, and mitigate risks. Procurement outsourcing providers can offer SRM expertise including supplier evaluation, performance measurement, collaboration tools, and risk assessment frameworks. The market opportunity lies in assisting organizations in developing robust SRM practices and implementing tools and processes that enhance supplier collaboration and value creation.
• Sustainability and Ethical Sourcing: With increasing focus on sustainability, organizations are seeking to incorporate environmental, social, and ethical considerations into their procurement processes. Procurement outsourcing providers can support organizations in implementing sustainable procurement practices including supplier sustainability assessments, responsible sourcing strategies, and traceability initiatives. The market opportunity lies in helping companies align their procurement activities with sustainability goals and regulatory requirements.

Global Procurement Outsourcing Market- Trends

• Increased Adoption of Digitalization: Digitalization is transforming the procurement landscape. Organizations are adopting advanced technologies such as artificial intelligence (AI), robotic process automation (RPA), blockchain, and cloud-based platforms to streamline and automate procurement processes. These technologies enhance efficiency, provide real-time visibility into procurement data, enable predictive analytics, and improve collaboration with suppliers.
• Focus on Data Analytics and Insights: Data analytics is becoming essential for procurement decision-making. Procurement outsourcing providers are leveraging advanced analytics tools to analyze vast amounts of procurement data, identify trends, assess supplier performance, optimize spend, and support strategic sourcing initiatives. By providing actionable insights and predictive analytics, service providers help organizations make informed decisions that drive cost savings, improve supplier relationships, and enhance overall procurement effectiveness.
• Sustainable and Ethical Sourcing Practices: Organizations are increasingly prioritizing sustainability and ethical sourcing in their procurement processes. These people are seeking procurement outsourcing providers who can assist in implementing sustainable procurement strategies, ensuring responsible sourcing practices, and monitoring supplier compliance. Service providers are developing frameworks and tools to assess supplier sustainability, track environmental and social impact, and enable transparent supply chains to meet the growing demand for sustainable procurement practices. For Instance, Coupa launched its Sustainable Business Spend Management (BSM) platform, to help business owners with their sustainability initiatives.
• Rise of E-Procurement and Supplier Networks: E-procurement platforms and supplier networks are gaining traction in the procurement outsourcing market. These platforms facilitate online supplier discovery, negotiation, and transaction management. These streamline procurement processes, improve supplier collaboration, and provide real-time visibility into supplier performance and pricing. Procurement outsourcing providers are partnering with e-procurement platforms and leveraging supplier networks to enhance their service offerings and provide a seamless procurement experience for their clients.

Global Procurement Outsourcing Market- Restraints

• Organizational Resistance to Change: Implementing procurement outsourcing often requires significant changes to existing processes, systems, and organizational structures. Some organizations may encounter resistance from internal stakeholders who are reluctant to adopt new ways of working or fear job displacement. Overcoming this resistance and managing the change effectively can be a restraint in the procurement outsourcing market. Counterbalance, to tackle this problem, it is essential to understand the reasons behind the resistance and address them effectively. The above steps can help to tackle this problem Involve employees in the change process, provide training and support, create a sense of urgency, and celebrate successes.
• Loss of Control and Visibility: Outsourcing procurement processes means relinquishing a certain degree of control over the day-to-day operations. Organizations may be concerned about losing visibility and oversight of their procurement activities, leading to a potential lack of transparency in supplier relationships, contract management, and procurement performance. Ensuring effective communication, reporting mechanisms, and governance structures becomes crucial to address this restraint. Counterbalance, to tackle the problem of loss of control and visibility during outsourcing relationships, it is important to build strong communication channels and outsourcing management awareness within the organization. This can help prevent the loss of visibility and control during outsourcing relationships, which can sometimes reduce the beneficial effects of outsourcing.
• Data Security and Privacy Concerns: Outsourcing procurement involves sharing sensitive data with external service providers. Organizations may have concerns about data security, privacy, and compliance with regulations, particularly when outsourcing involves offshore locations. Ensuring robust data protection measures, confidentiality agreements, and adherence to data privacy regulations becomes essential to mitigate these concerns. Counterbalance, companies need to take these concerns seriously and implement appropriate measures like Ensuring robust data protection measures, confidentiality agreements, and adherence to data privacy.
• Limited Supplier Relationships and Market Knowledge: Organizations often have established connections with suppliers they value for gaining a competitive edge. When they decide to outsource their procurement, they might worry about losing control over these relationships and market insights. To overcome this concern, it's vital to choose the right outsourcing partner who has strong supplier connections and knows the market well. To balance this, you can enhance visibility with your suppliers and include them in important strategic talks. Also, consider using e-procurement tools to collect and share data with your suppliers, making it accessible to both sides in tools designed for managing supplier relationships.

Global Procurement Outsourcing Market- Recent Developments

Key Development

• Q1 2023 by SAP Ariba: On 17 March 2023 SAP Ariba release the product Q1 2023 (2302) for both SAP Procurement and SAP Business Network product areas. SAP Ariba is an American software and information technology services company.
• Business Spend Management (BSM) by Coupa: On June 15, 2021, Coupa launched its Sustainable Business Spend Management (BSM) platform, to help business owners with their sustainability initiatives. Coupa is a cloud based Business Spend Management platform that allows organizations to manage business spend across Procurement, Supply Chain & Finance.

Key strategic Initiatives

• In 2022, Coupa the cloud based Business Spend Management platform that allows organizations to manage business spend across Procurement, Supply Chain & Finance, entered into definitive agreement to be acquired by Thoma Bravo. Thoma Bravo is a leading software investment firm.
• In 2022, Ivalua is a leading provider of cloud-based procurement software to manage all spend & suppliers on a modular & unified source-to-pay platform acquired Spend Matters, a leading provider of procurement research and advisory services. This provided Ivalua a stronger understanding of the procurement market and its customers.

Figure 2. Global Procurement Outsourcing Market Share (%), By Service Type, 2022

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Top companies in Global Procurement Outsourcing Market

• Accenture Plc
• IBM Corporation
• GEP Worldwide
• Infosys Limited
• Capgemini SE
• Genpact Ltd.
• WNS (Holdings) Limited
• HCL Technologies Ltd.
• Wipro Limited
• Tata Consultancy Services Limited
• Xchanging Solutions Limited
• Corbus, LLC
• Proxima Group
• Aquanima
• CA Technologies (Broadcom Inc.)

*Definition: Procurement outsourcing refers to the practice of delegating the procurement process to external service providers, who manage and execute various aspects of the procurement function on behalf of organizations. It involves outsourcing activities such as supplier selection, negotiation, purchasing, and supply chain management to specialized service providers, allowing businesses to leverage their expertise and achieve cost savings, operational efficiency, and strategic procurement objectives.