Introduction

PO has not taken off although it started around the same time as other BPOs like HRO and FAO. The PO market continues to show tremendous value potential, but is still in the pioneer stage of market maturity. Given the huge untapped potential and the current state of the PO market, Everest Research Institute´s focus for this research was to understand and highlight the key barriers that have prevented the PO market from achieving its potential. This report provides initial hypotheses to assist the company considering outsourcing procurement and the suppliers of PO services to address the primary concerns that have prevented PO from realizing its potential. 

Scope

• Third-party PO contracts and does not include shared services or captives
• Multi-process PO contracts that involves outsourcing of three or more activities from the Source-to-Pay (S2P) process with at least one activity each from Sourcing and Procure-to-Pay (P2P), addresses at least US$150 million of managed spend, and has a contract length of at least three years
• All multi-process PO contracts across all industries and geographies signed as of September 2005
• In-depth supplier and buyer perspective based on discussions with leading PO suppliers and Everest´s consulting teams serving PO buyer
  

Contents

This report summarizes key market trends and insights to assist management in making more informed business decisions. Key insights are discussed in detail (and illustrated with supporting data and analysis) to provide the reader information in easy-to-apply, bite-size pieces. The report provides implications for buyers and suppliers of PO and discusses the following themes:

• The untapped potential of PO for buyers and suppliers
• The primary concerns (and the key reasons underlying these concerns) that have prevented PO from taking off
• The breakdown in key outsourcing practices that are required to address these concerns
• Initial hypotheses that highlight the actions required to address the breakdown