Procurement Outsourcing Poised to Double

Nov. 1, 2003
BERLIN; -- Nearly half of companies in Europe and the United States are considering outsourcing part of their procurement operations within three years,

BERLIN; -- Nearly half of companies in Europe and the United States are considering outsourcing part of their procurement operations within three years, more than double the 22 percent of respondents who said they currently outsource aspects of procurement, according to a survey released by Accenture (NYSE: ACN).

Results of the survey, which entailed querying more than 200 procurement directors from a wide variety of industries across Europe and the United States, indicated that companies in France are most likely to outsource their procurement in the near future, with 64 percent of respondents there saying they would do so by 2006. Companies in the United Kingdom and United States were the next most likely to outsource procurement functions by 2006 (58 percent each), followed by companies in Italy (42 percent). Thirty nine percent of all companies from Germany, Austria and Switzerland said they anticipate outsourcing procurement processes in the next three years.

Additionally, non-strategic processes ? such as application hosting and requisitioning-to-pay ?and indirect spend categories are the areas most often outsourced. Referring to these activities, 43 percent of respondents said they were attracted by the combined opportunities for cost reduction and the ability to focus more time on the management of the categories that they retained in-house. However, 22 percent of respondents said they were prepared to consider outsourcing part of their direct materials by 2006, compared to 9 percent that do so today.

"Survey results show that procurement outsourcing is here to stay," said Richard Laub, the partner who heads Accenture's European procurement practice. "Looking ahead, however, the principal challenge will be to derive more than just cost-savings. Procurement outsourcing is a powerful weapon that savvy companies can use to build new strategic and competitive advantages."

Company size ? in terms of sales revenues ? is the clearest indicator of both present and anticipated use of procurement service providers. Thirty-one percent of the largest companies surveyed said they presently outsource some aspect of procurement, while another 36 percent said they plan to do so in the future. Conversely, only 15 percent of smaller companies said they outsource procurement functions today, while another 34 percent said they intend to do so in the future.

"The businesses most likely to outsource all or part of their procurement processes are large companies that might have exhausted most of the gains available to them through their own internal efforts, but nonetheless continue to set aggressive cost-reduction targets," said Laub. "Those companies are smart to recognize that outsourcing is a great way to turn ambitions into actions."


From April through July of 2003, 219 procurement directors from companies in 14 European countries and the United States completed a Web-based survey on their current and anticipated procurement operations. Eighty-three percent of respondents work in organizations with sales revenues exceeding $500 million, and 67 percent of organizations had operations at five or more locations. Respondents represented the manufacturing, telecommunications, retail, services and public sectors.

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