Procurement Purchasing Outsourcing Market is Estimated to Witness High Growth Owing to Increasing Demand From SMEs

Market Overview:

Procurement outsourcing refers to the process of outsourcing procurement functions like sourcing, purchasing and supplier relationship management to third-party service providers known as procurement outsourcing service providers. This helps businesses focus on their core competencies.

Market Dynamics:

The growing popularity of outsourcing as a strategy to reduce costs and improve process efficiencies is driving the procurement purchasing outsourcing market growth. With procurement outsourcing, companies can leverage the specialized expertise of third-party service providers to enhance procurement operations. This helps in gaining access to global supply chains and scale negotiated spend. Additionally, increasing demand from small and medium enterprises to outsource non-core activities is also fueling the market growth. SMEs usually lack in-house expertise and resources for procurement functions. Outsourcing to professional service providers allows SMEs to achieve cost savings and compliant procurement processes.

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Procurement Purchasing Outsourcing Market Drivers

Cost Reduction Through Centralized Procurement of Goods and Services

Centralized management of procurement operations allow organizations to reduce costs significantly by leveraging economies of scale. By outsourcing non-core procurements to specialist service providers, companies can focus internal resources on strategic initiatives while availing bulk purchase discounts, lower unit costs and process optimization benefits from outsourcers. This helps lower overall procurement expenses and boosts profit margins.

Improved Efficiency Gained from Streamlined Sourcing Processes

Outsourcing procurement activities allows for standardization and automation of routine purchasing tasks. Service providers implement best practices, technologies and centralized catalogs to streamline requisitioning, vendor management, contract negotiations and payment workflows. This elevates process efficiency, brings transparency in spend analysis and ensures regulatory compliances. It frees up internal teams to focus on strategic planning while leveraging expertise of outsourcing firms to drive higher efficiencies in the procure-to-pay cycle.

Procurement Purchasing Outsourcing Market Restrain

Loss of Direct Control and Flexibility in Procurement Decision Making

Relying on third party providers for mission critical procurement functions results in partial loss of control over processes and approvals. Organizations have to compromise on customization needs and depend on outsourcers for flexibility in decision making related to sourcing strategies, vendor selections and contract terms. There are limitations in changing service level agreements at a short notice due to contractual obligations. This acts as a deterrent for some companies wanting complete autonomy over procurement operations.

Procurement Purchasing Outsourcing Market Opportunity

Growing Adoption of Procure-to-Pay Automation Solutions

Emergence of cloud-based procurement automation platforms is opening up new frontiers for shared services providers. Technological capabilities around e-procurement marketplaces, automated workflows, AI-driven spend analyses and cognitive capabilities are helping transform traditional outsourcing. This provides an opportunity for service firms to offer next-generation procurement as a service models leveraging digital enablers. It allows addressing more complex outsourcing requirements of clients across procurement, accounting and back office functions on an integrated platform.

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Procurement Purchasing Outsourcing Market Trends

Rising Preference for As-a-Service Procurement Outsourcing Models

Propelled by capabilities of cloud and mobility, the market is shifting from traditional outsourcing engagements to consumption-based multi-tenant as-a-service models. Leading firms are launching procurement sourcing platforms as cloud services to address dynamic outsourcing needs of customers. This helps procurement outsourcing clients to pay only for resources utilized, avoid large upfront costs and gain instant access to latest technologies. As-a-service engagements are scalable, offer quicker time-to-value and support hybrid outsourcing and insourcing requirements of organizations.

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