Procurement outsourcing refers to outsourcing procurement or supply chain related processes and activities to third party service providers also referred as Procurement Service Providers (PSPs). This provides opportunities for companies to improve efficiency and reduce costs. Key functions that are generally outsourced include source management, supplier management, procurement execution, procurement administration, and procurement analytics. Outsourced procurement services help companies focus on their core activities while benefiting from professional expertise and economies of scale of dedicated procurement outsourcing companies. Small and medium enterprises especially benefit from procurement outsourcing as it reduces costs related to maintaining specialized procurement teams and infrastructure.
The global procurement outsourcing Market is estimated to be valued at US$ 5.15 billion in 2024 and is expected to exhibit a CAGR of 6.5% over the forecast period 2024 to 2031, as highlighted in a new report published by Coherent Market Insights.
Growing need to reduce operational costs remains a key driver for procurement outsourcing market. Outsourcing procurement activities allows companies to transfer fixed operational costs related to procurement teams and systems to variable usage based outsourcing costs. This significantly reduces procurement costs without compromising on expertise. The other driver mentioned in the heading, growing need to reduce operational costs also drives increased focus on procurement outsourcing. By outsourcing non-core procurement activities, companies can optimize procurement spending and achieve savings of 10-30% on material costs. Dedicated procurement outsourcing companies achieve these savings through economies of scale, professional expertise, standardized processes and technologies.
The procurement outsourcing market is segmented based on source into direct and indirect. The direct procurement segment is dominating the market as companies are outsourcing direct procurement activities like obtaining raw materials and parts directly from suppliers. This helps companies to focus on their core business activities.
Political: Outsourcing is facing resistance from labor unions in some countries due to loss of jobs. However, favorable government policies are supporting the market growth.
Economic: Rising cost of operation is encouraging companies to opt for outsourcing to gain operational efficiency and improve profitability. Outsourcing reduces capital expenditure.
Social: Issues related to job security, data security and privacy due to outsourcing are key challenges. However, companies are taking necessary steps to address these issues to gain customers’ trust.
Technological: Adoption of automation, analytics and artificial intelligence are helping outsourcing companies to streamline procurement processes and deliver value-added services to clients.
The Global Procurement Outsourcing Market Share is expected to witness high growth. The global procurement outsourcing Market is estimated to be valued at US$ 5.15 billion in 2024 and is expected to exhibit a CAGR of 6.5% over the forecast period 2024 to 2031.
Regional analysis related content comprises North America has the largest market share currently. Factors such as presence of leading outsourcing companies and early adoption by enterprises are driving the market. Asia Pacific is expected to grow at the fastest pace during the forecast period owing to growing outsourcing trend among companies in countries like China and India to optimize procurement costs.
Key players operating in the procurement outsourcing market are IBM, Accenture, GEP, Infosys, Capgemini, Genpact, TCS, and WNS. IBM offers AI-powered procurement software to help organizations gain end-to-end spend visibility and process automation. Accenture provides category management, procurement analytics, supply chain finance and other services to optimize client spend.
Source: Coherent Market Insights, Public sources, Desk research
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