PROCUREMENT AS A SERVICE MARKET SIZE AND SHARE ANALYSIS - GROWTH TRENDS AND FORECASTS (2024-2031)

Procurement As a Service Market Size and Trends

Global Procurement As a Service Market is estimated to be valued at US$ 7.03 Bn in 2024 and is expected to reach US$ 15.12 Bn by 2031, exhibiting a compound annual growth rate (CAGR) of 11.6% from 2024 to 2031.

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Global procurement as a service market is witnessing significant growth over the past few years. The rising need to improve operational efficiency and reduce overhead costs among organizations across various end-use verticals is driving the adoption of procurement as a service. Procurement as a service allows companies to focus on their core business activities while leveraging third-party expertise for sourcing raw materials and components. The growing popularity of spends analytics, E-procurement software and services, and automated procurement processes is also propelling the market forward. The factors such as globalization of business networks and increased demand for scalable and flexible procurement solutions are expected to boost the procurement as a service trend during the forecast period.

Growing preference for outsourcing non-core operations

In today's dynamic and competitive business landscape, companies are under constant pressure to streamline costs and focus their resources on core competencies that can help them gain competitive advantage. There is a growing preference among organizations to outsource support functions and non-revenue generating operations to specialist third-party providers. Procurement is one such functions that many companies prefer to delegate to experts as it involves complex processes, requires specialized skills and continuous technology upgradation. Managing sourcing, vendor negotiation, contract management and supplier performance in-house requires significant investment of time and capital. By outsourcing procurement through SAS platforms, organisations free up resources that can be channelled towards more strategic goals. They are also able to leverage subject matter expertise and best practices of specialist procurement firms to drive better outcomes. This is helping the procurement as a service market gain steady adoption across verticals.

Market Concentration and Competitive Landscape

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Increasing demand for scalable, customizable and compliant procurement platforms

Business environment are increasingly volatile with changing regulations, emerging technologies and evolving customer demands. Organizations need procurement solutions that offer flexibility to scale and adapt according to their dynamic requirements. Traditional on-premise procurement suites lack the agility and ease of configuration found in cloud-based platforms. Procurement as a service models allow organizations to leverage subscription-based, software-as-a-service tools that are easy to set up and require low upfront investments. These solutions are highly customizable based on an organization's specific procurement processes, spend categories and compliance policies. They also integrate seamlessly with other enterprise systems for a centralized procurement experience. The platform-based procurement services enable organizations to quickly scale user licenses, extend geographical reach and modify configurations in real-time. They ensure compliance with latest trade agreements and government policies. This scalability, customizability and regulatory compliance are compelling benefits driving the demand for procurement as a service solution.

Key Takeaways from Analyst:

Global procurement as a service market is expected to grow significantly over the forecast period owing to rising outsourcing of non-core functions by companies. Adoption of cloud-based procurement solutions is also driving higher adoption of procurement as a service. North America will continue to dominate the market due to early adoption of advanced technologies. However, Asia Pacific is likely to showcase the fastest growth by growing digitalization across industries in major economies like China and India.

Organizations are increasingly outsourcing procurement activities to manage service providers to streamline operations and focus on their core competencies. This is a major factor of prompting the increased uptake of procurement as a service solution. Cost reduction and access to experts' capabilities are other key drivers fuelling the procurement as a service trend. Nevertheless, data security concerns and lack of control over strategic functions may impede the market's growth.

Switching to procurement as a service platform enables companies to leverage best-in-class technologies and tools with access to experts while paying only for actual usage. This offers opportunities for service providers to expand their client base. With growing adoption of artificial intelligence and advanced analytics in procurement is expected to enhance service providers' efficiency and capabilities. Collaborations between technology firms and procurement service providers may also emerge as a large opportunity.

Market Challenges: Data Security Concerns

Data security concerns is one of the major challenges restraining the growth of procurement as a service market. Procurement as a service involves handling and sharing of sensitive organizational data like financial data, employee records, customer information, and others with third party service providers over the cloud. This raises significant compliance and security risks for organizations. Many organizations are hesitant to adopt procurement as a service solutions due to fear of data breaches and lack of control over sensitive data. Cyberattacks targeting cloud-based services are increasing rapidly over the years. For example, according to the Federal Bureau of Investigation (FBI) internet crime report of 2022, cyberattacks targeting cloud infrastructure increased by over 65% from 2020 to 2022. Ransomware attacks rose by over 150% during the same period compromising critical infrastructure like healthcare and transportation according to the report. Such incidents have eroded customer trust in the security of cloud platforms.

Compliance with stringent data protection regulations also poses challenges for procurement as a service provider as well as customers. Regulatory mandates like General data protection regulation (GDPR) in Europe impose hefty fines and penalties for non-compliant data handling practices. Ensuring adherence to such regulations increases operational complexity and costs for procurement as a service vendors. Many small and medium enterprises hesitate to switch to cloud procurement solutions due to inability to meet regulatory audit requirements. This risk averse attitude has restricted the proliferation of procurement as a service adoption across industry verticals.

Thus, data security and compliance risks associated with sharing sensitive organizational data over the cloud are significant roadblocks in the growth of procurement as a service market. Strong measures to bolster cloud security controls, establish robust data governance practices and build customer trust would be critical for vendors to address these concerns and unlock the market's true growth potential going forward.

Market Opportunities: Enhanced Visibility & Control

Enhanced visibility and control have the potential to significantly boost efficiencies in the procurement as a service market. Procuring goods and services is a complex process that involves coordinating with multiple internal departments and external suppliers. Lack of visibility into the end-to-end procurement workflow often results in delays, cost overruns and compliance issues. However, emerging cloud-based procurement platforms now offer analytics and governance tools that provide real-time visibility and control across the source-to-pay process. These platforms aggregate and analyze spend data from ERP systems and e-procurement portals, flag anomalies and compliance gaps, and present actionable insights to procurement managers.

Furthermore, such solutions integrate with supplier databases and contract lifecycle management systems. This enables procurers to remain updated on supplier capabilities, performance parameters, insurance/tax compliances in a structured digital format. It also automates tasks like raising purchase orders, three-way matching of invoices and receipts, and tracking deliveries. The centralized dashboard provides a single point of control and oversight to monitor procurement KPIs across geographical boundaries. Various government and NGOs have reported significant benefits from deploying these platforms.

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Insights By Component- Increased outsourcing drives demand for Strategic Sourcing

In terms of component, strategic sourcing segment is expected to contribute 30.2% share of the market in 2024 owing to the growing trend of outsourcing non-core functions among organizations. Strategic sourcing services help companies to focus on their core competencies by outsourcing procurement activities such as supplier relationship management, contract negotiations, cost analysis and spend analytics. This allows internal procurement teams to shift their focus to more strategic initiatives that can deliver greater value.

As operational costs continue to rise, many organizations are looking to optimize indirect spend through strategic sourcing. Outsourcing such activities to procurement specialists enables companies to leverage expert networks and analytics tools to identify new cost savings opportunities and negotiate better deals. Compared to handling sourcing in-house, strategic sourcing consultants also have access to a wider pool of qualified suppliers globally. This helps companies achieve improved cost efficiency, consolidate supplier bases, and streamline procurement processes.

Another key factor driving the strategic sourcing segment is the evolution of cloud-based sourcing platforms. Modern sourcing platforms powered by artificial intelligence and advanced analytics are transforming the sourcing landscape. They automate many routine tasks, provide 360-degree spend visibility, and recommend optimal sourcing strategies. Leveraging such innovative tools through strategic sourcing services allows companies across industries to digitally transform their procurement functions and fuel sustainable cost reductions.

Insights By Enterprise Size - Need for enhanced spend visibility and control in large enterprises

In terms of enterprise size, large enterprises segment is expected to contribute 61.3% share of the market in 2024 due to their scale of operations and complex procurement needs. Large enterprises often have decentralized procurement activities across multiple business units, regions and categories. This makes it challenging for in-house teams alone to maintain spend visibility, enforce compliance, and control maverick spending.

Outsourcing procurement processes to strategic sourcing specialists helps large enterprises overcome such issues through spend consolidation and process standardization. Advanced spend analytics tools used by service providers give centralized oversight of all categories. This assists in identifying opportunities to leverage scale through enterprise-wide contracts. Moreover, implementing category management strategies tailored for large enterprises can help optimize total cost of ownership.

Compliance is another major concern for large enterprises operating globally. Strategic sourcing consultants effectively mitigate compliance risks through their supplier risk management and contract repository services. They ensure all procurement activities strictly adhere to regulatory guidelines. For large enterprises, outsourcing such tasks fosters more agility in regulatory changes while keeping non-compliance costs at bay. The scalability, process consistency and control offered through procurement services are invaluable benefits for multi-national corporates.

Insights By Vertical - Compliance needs driving procurement outsourcing in regulated industries

In terms of vertical, manufacturing segment accounts for the 36.1% share in 2024 due to strong compliance needs in the industry. Manufacturers, especially those operating in sectors such as automotive, aerospace and medical devices, are subject to stringent quality and safety regulations. Their suppliers are also required to meet high standards in production, documentation and testing.

Non-compliance in the sourcing of direct or indirect materials can disrupt operations and damage brand reputation. It also poses risks of expensive fines and recalls. To ensure impeccable supplier quality and regulatory adherence, many manufacturing enterprises now rely on procurement outsourcing specialists. Experienced service providers thoroughly vet suppliers based on criteria beyond just price and quality. Their auditing capabilities and supplier performance tracking systems further help sustain compliance.

Additionally, navigating frequent changes in environmental, trade and product safety laws is a core competency of professional procurement consultancies. This gives manufacturing firms the surety of always meeting audits while focusing energy on their engineering strengths. Outsourcing non-core procurement also fortifies manufacturers' resilient supply chain infrastructure and future-proofs their compliance posture. As regulations continue to tighten globally, demand for such elevated compliance through outsourcing will keep rising across industrial sectors.

Regional Insights

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North America has established itself as the dominant region in the global procurement as a service market with 37.8% share in 2024. The early adoption of cloud-based technologies along with the mature outsourcing industry in countries like the U.S. has driven the market growth. Many leading technology giants and consulting firms that provide procurement services have their headquarters in the region. This has created a conducive ecosystem for innovation and accessibility of procurement solutions in the region.

Corporations in industries like retail, manufacturing, and automotive have complex global supply chains, which increases the need for procurement outsourcing and management of supply chain operations. This along with the willingness to focus on core business competencies rather than non-core procurement functions has boosted the demand for procurement services in North America. However, growth in the region is expected to be steady instead of exponential due to market maturity.

Asia Pacific region is poised to be the fastest growing market for procurement services globally over the next decade. Countries like China, India and other ASEAN nations are industrial powerhouses with developing outsourcing markets. There is a growing inclination among businesses to streamline procurement processes through digital transformation initiatives. Moreover, procurement expenditure of organizations comprises a significant portion of their operating costs. By outsourcing non-core procurement functions, firms are able to generate substantial savings. The combination of these factors is driving heightened demand for procurement as a service solutions across industries in Asia Pacific. Coupled with the accelerated growth of indigenous service providers, APAC offers immense untapped potential for global procurement firms to expand their footprint.

Market Report Scope

Procurement As a Service Industry News

• In April 2022, Tata Consultancy Services (TCS) announced a strategic partnership with the Financial Ombudsman Service (FOS), a leading U.K.-based ombudsman organization. With this collaboration, TCS will work to enhance and future-proof the digital services provided by FOS, helping the organization improve its grievance redressal processes, eliminate discrimination, and better serve and support its clients.
• In May 2022, Bain & Company strengthened its procurement capabilities by acquiring Proxima, a leading procurement and supply chain consulting firm. Proxima's expertise will enhance Bain's existing procurement solutions, enabling the company to deliver more comprehensive and effective services to clients. Following the acquisition, Proxima will operate independently under Bain's specialist procurement implementation service line, leveraging its deep knowledge and global reach to support clients across various industries and sectors.
• In February 2022, Bain & Company, a global management consulting firm, acquired ArcBlue, a leading procurement consulting firm in the Asia Pacific region. As a part of the deal, ArcBlue will operate independently as a part of Bain's specialist procurement implementation service line. This acquisition aims to strengthen Bain's existing procurement offerings and enable the combined entity to deliver differentiated, cost-effective, end-to-end procurement solutions to clients across the Asia Pacific region. By leveraging ArcBlue's deep expertise in areas like procurement transformation, category management, strategic sourcing, and sustainability, Bain seeks to become the leading procurement advisor in the Asia Pacific market.
• In November 2021, Accenture acquired ClearEdge Partners, a firm specializing in procurement spend management. This acquisition is expected to enhance Accenture's ability to help clients generate cost savings and extract greater value from their existing IT investments.
• In November 2021, Accenture and Icertis formed a strategic partnership that brings together Icertis' industry-leading Icertis Contract Intelligence (ICI) platform with Accenture's digital transformation expertise. This collaboration aims to help clients across industries gain enhanced visibility into their contracts, manage risks more proactively, and streamline the contracting process for greater efficiency and effectiveness.
• In November 2021, WNS, a leading global business process management provider, launched WNS FINSIBLE - a comprehensive suite of banking solutions designed to empower FinTechs in efficiently streamlining, managing, and scaling their operations.

*Definition: Global procurement as a service market provides procurement outsourcing services globally to help companies streamline and improve their overall procurement processes. It offers procurement expertise, advanced technology, and global supplier networks to manage sourcing, contracting, spend analysis, supplier management, and other procurement functions. Using a shared services model, it helps in reducing costs, manage risk, ensure compliance with trade laws and regulations, and gain visibility across an organization's complex global supply chain.

Market Segmentation

•  Component Insights (Revenue, US$ Bn, 2019 - 2031)
  • Strategic Sourcing
  • Spend Management
  • Process Management
  • Category Management
  • Contract Management
  • Transaction Management
•  Enterprise Size Insights (Revenue, US$ Bn, 2019 - 2031)
  • SMEs
  • Large Enterprises
•  Vertical Insights (Revenue, US$ Bn, 2019 - 2031)
  • Manufacturing
  • Retail
  • IT & Telecom
  • BFSI
  • Healthcare
  • Others
• Regional Insights (Revenue, US$ Bn, 2019 - 2031)
  • North America
    • U.S.
    • Canada
  • Latin America
    • Brazil
    • Argentina
    • Mexico
    • Rest of Latin America
  • Europe
    • Germany
    • U.K.
    • Spain
    • France
    • Italy
    • Russia
    • Rest of Europe
  • Asia Pacific
    • China
    • India
    • Japan
    • Australia
    • South Korea
    • ASEAN
    • Rest of Asia Pacific
  • Middle East & Africa
    • GCC Countries
    • Israel
    • South Africa
    • Rest of Middle East & Africa
• Key Players Insights
  • Accenture plc
  • Aegis One Consults Ltd
  • CA Technologies
  • Capgemini
  • Corbus India LLP
  • F-code
  • GEP
  • Genpact
  • HCL Technologies Limited
  • IBM Corporation
  • Infosys Limited
  • Proxima Group
  • Simfoni Limited
  • Tata Consultancy Services (TCS)
  • Wipro