Procurement Outsourcing Contracts Decreased in '08
According to Everest Research’s 2009 annual report - new contracts for procurement outsourcing (PO) services declined in 2008, while expansion of existing contracts sustained a 30% annual growth rate.
The study revealed that annual contract value of PO spend surpassed the $1 billion mark in 2008, with large companies signing 54% of all new PO contracts signed last year. However, the total number of new contracts signed decreased as compared to 2007. At the same time, strong interest and expansion of existing contracts sustained a 30 % annual growth rate.
The ‘Procurement Outsourcing (PO) Annual Report 2009: Shifting Buyer Preferences Dictate New Engagement Models’ said market growth was evident as suppliers’ managed, non-core PO spend was up $16 billion over the previous year, crossing $110 billion.
"Last year’s drop in new contract spending is the result of a changing buyer approach, not a lack of interest in PO," said Katrina Menzigian, vice president of Everest Research Institute. End-to-end PO suppliers Accenture, IBM, and, ICG Commerce hold nearly 80 % of market share. IBM accounted for 70 % of new TCV signed last year.
"Suppliers need to focus on pursuing organic growth opportunities, leverage Finance and Accounting Outsourcing (FAO) to expand into PO services and create differentiation through strategic use of global sourcing," said Saurabh Gupta, research director of Everest and co-author of the report.
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