News @ TPI
PROCUREMENT OUTSOURCING ON THE RISE ACCORDING TO TPI-SPONSORED BENCHMARK REPORT
- 40 Percent of Enterprises Expected to Engage in Procurement Outsourcing in Next Two Years
- Strategic Value is Driver Behind Procurement Outsourcing
- Top-Performing Enterprises More Likely to Recognize Strategic Benefits in Addition to Cost-Savings
TPI, the largest sourcing advisory firm and a unit of Information Services Group, Inc. (ISG) (NASDAQ: IIIIU, III, IIIIWS), a leader in the information-based services industry, announced today that it has sponsored a new benchmark report, “Procurement Outsourcing: A Strategic Imperative,” published by the Aberdeen Group, a leading provider of fact-based research and market intelligence. This report, which incorporates the insights of procurement executives from more than 260 enterprises, is indispensible for organizations looking to improve the strategic value procurement functions can provide, reaching far beyond tactical, cost-cutting benefits.
While some hesitancy to adopt procurement outsourcing continues to exist, stemming from a perceived loss of control, challenges related to quantifying benefits and/or a belief that procurement is a core competency, the findings indicate that 40 percent of enterprises are expected to be engaged in some level of procurement outsourcing in the next two years. Organizations wishing to expand their global service delivery capabilities and the process rigor involved in procurement are some of the reasons for this expected growth. Procurement outsourcing is also becoming more attractive to enterprises as service providers can also offer labor arbitrage and core competencies in transaction and process management capabilities, which often are difficult and expensive to sustain internally. The potential return on investment for adopters points to procurement outsourcing increasingly becoming a viable strategy for operational process improvement.
The report reveals that top-performing enterprises are more likely to adopt procurement outsourcing. This can be attributed to the fact that these companies are proficient in measuring the gaps between their current procurement performance and where they could be through strategic actions by leveraging scale, analytics, automation and supply chain expertise. In addition to realizing 28 percent improvements on their procurement cost savings, these organizations are gaining key strategic advantages such as streamlining business processes and improving operational performance overall.
“Benefits gained from procurement outsourcing derive from tactics well beyond labor arbitrage, and therefore the proposition is often misunderstood by both procurement and outsourcing practitioners, resulting in a much slower rate of adoption than other forms of outsourcing. However, of all forms of outsourcing, procurement outsourcing, because it can have an impact on 25-50 percent of the expense base of a company, has the potential to drive some of the most dramatic bottom-line benefits to corporations,” said Bill Huber, director, TPI. “We supported this project because it provides clarity on the paradigm shift occurring in procurement outsourcing and a solid benchmarking process for organizations to use when evaluating their own procurement models.”
“Our research has discovered that top-performing enterprises are more likely to leverage third-party expertise in the form of outsourcing,” said Bill Browning, research analyst, Aberdeen. “These companies are realizing strategic benefits such as gaining service provider and market intelligence, and streamlining operations, while also delivering cost and process savings.”
The report also recommends that enterprises considering procurement outsourcing should start by carefully evaluating current process and technology capabilities to establish a baseline and identify the spectrum of potential benefits through outsourcing. After that crucial groundwork is laid, organizations can focus on the strategic advantages that can be gained in addition to the tactical, cost-cutting results.
To obtain a copy of the report please visit http://www.tpi.net/pdf/researchreports/Aberdeen_on_Procurement_Outsourcing_Nov07.pdf.
Visit Bill Huber’s blog on Consider the Source (www.considerthesourceblog.com) for additional thoughts on the benchmark report and the misperceptions that exist regarding procurement outsourcing.
About TPI
TPI, a unit of Information Services Group, Inc. (ISG), is the founder and innovator of the sourcing advisory industry, and the largest sourcing advisory firm in the world. We are expert at a broad range of business support functions and related research methodologies. Utilizing deep functional domain expertise and extensive practical experience, TPI’s accomplished industry experts collaborate with organizations to help them advance their business operations through the best combination of outsourcing, offshoring, shared services and internal service optimization. For additional information, visit www.tpi.net.
About Information Services Group, Inc.
Information Services Group, Inc. (ISG) was founded in 2006 to build an industry-leading, high-growth, information-based services company by acquiring and growing businesses in advisory, data, business and media information services. In November 2007, the company acquired TPI, the largest independent sourcing advisory firm in the world. Based in Stamford, Conn., ISG has a proven leadership team with global experience in information-based services and a track record of creating significant value for shareowners, clients and employees. For more, visit www.informationsg.com.