Procurement Outsourcing (PO)
Market Update: February 2008 – Preview Deck
Background and methodology of the research
Background of the research:The Procure-to-Pay (P2P) process represents a point of convergence between the finance and the procurement functions. FAO buyers who have traditionally outsourced the transaction-intensive
Accounts Payable (AP) process are now looking at extending the value by expanding the scope of their engagements to P2P. At the same time, buyers considering outsourcing their procurement function are approaching P2P outsourcing as a stepping-stone towards full-service or Source-to-Pay (S2P)
outsourcing. As a result, we are witnessing a rising demand along with an expanding supply-base for outsourced P2P services
In this research study, we investigate the business value and the market state of outsourcing the P2P process. The objectives are to analyze the following:
Value proposition for outsourcing P2P Solution characteristics of outsourced P2P Impact on supplier landscape
Implications for buyers and suppliers
The research methodology is based on three key information sources:
An executive level Web-based buyer and supplier survey
Proprietary Everest database of multi-process PO contracts signed as of August 2007
Focused interviews with a diverse set of suppliers including Accenture, Genpact, IBM, Infosys BPO,
Table of contents
(page 1 of 2)
Section I: Summary of key messages 5
Section II: Value proposition 6
Summary 7
Process definition 8
Typical savings from a PO contract 9
Outsourcing value proposition by process scope 10
Satisfaction levels of buyers that have outsourced AP 11
Five-step roadmap to realize savings in S2P outsourcing 12
Pain-points in buyer’s financial supply chain 13
Buyer interest in outsourcing P2P and demand by sub-process 14
Key challenges in moving from a piecemeal to an end-to-end outsourcing approach 15
Section III: Solution characteristics 17
Summary 18
Convergence between F&A and procurement functions 19
Applicability of value creation levers for PO by process scope 20
P2P offerings by industry focus and category focus 21
Degree of offshoring in PO contracts by process scope 22
Existing and potential degree of offshoring in P2P 23
Technology solutions/services required from suppliers 24
Table of contents
(page 2 of 2)
Section IV: Supplier landscape 25
Summary 26
Supplier market shares 27
PO supplier capability across outsourcing value levers 28
Shifts in PO supplier landscape driven by demand for P2P outsourcing 29
Supplier interest and maturity in outsourced P2P services 30
Investments in delivery capability 31
z Acquisitions 32
z Partnerships 33
z Internal investments 34
Section V: Implications for key stakeholders 35
Implications for buyers 36
Implications for suppliers 38
Appendix 40
Supplier profiles 41
Buyer case studies 55
Web-based survey: response profile 57
Glossary of key terms 58
Research references 62
Overview and abbreviated summary of key messages
(page 1 of 2)
This report examines the expanding market opportunity around the outsourcing of Procure-to-Pay (P2P) processes. It focuses on identifying the emerging value proposition of an end-to-end approach in
addressing converging buyer requirements between the F&A and procurement processes. Based on extensive primary research, including a buyer survey and in-depth supplier interviews, this study
explores perspectives on adoption trends, solution components, supplier capabilities, and the supplier landscape. The study concludes with Everest’s assessment of implications for buyers and suppliers, addressing both opportunities and challenges. Finally, this report also provides over a dozen profiles of the P2P offerings of specific suppliers, along with case studies.
Outsourcing P2P can create business impact beyond a direct-cost impact by
addressing the pain-points in a buyer’s financial supply chain
Despite the value proposition, organizational, technological, solutioning, and
contractual challenges impact adoption rates of P2P outsourcing Value
proposition
Some of the findings in this report, among others, are:
Moving beyond labor arbitrage, process efficiency and effectiveness, along
with technology applications are increasingly emerging as key value creation levers in P2P outsourcing
Technology is fast becoming a pivotal component of most PO engagements.
End-to-end technology solutions are gaining more importance as the scope expands from AP to P2P
Solution
Overview and abbreviated summary of key messages
(page 2 of 2)
The emerging P2P opportunity is serving as a point of entry into the PO
market for FAO centric suppliers expanding solutions bottom-up from AP to P2P and offshore centric suppliers leveraging existing global sourcing
capabilities to offer P2P. However, the maturity of end-to-end offerings varies by sub-processes
Most suppliers that offer or plan to offer P2P services are making
investments in building delivery capability through acquisitions, partnerships, and internal investments
This study offers five distinct chapters providing a deep
dive into key aspects of the P2P market; below are four
charts to illustrate the depth of the report
Source: Everest Research Institute (2008)
Pain-points in buyer’s financial supply chain
Percentage response
Supplier landscape
Horizontal vs. industry-focused P2P offerings
Number of suppliers
Investments in P2P delivery capability
ILLUSTRATIVE
Moderately important Very important Less important
Critical
High manual intervention Large number of paper invoices Lack of data visibility Large working capital Large number of disputed invoices Long lead time to close books Large write-offs due to aging
XX% XX% XX% XX% Investments in P2P delivery capability Acquisitions 1 Partnerships 2 Scale/expertise driven 1a Technology driven 1b Technology driven 2b Process driven 2a Internal investments 3 People/process driven 3a Technology driven 3b XX% XX% Horizontal Industry-focused 100% = XX
Serving as a point of entry into the PO market
FAO centric suppliers expanding solutions bottom-up from AP to P2P
Offshore centric suppliers leveraging existing global sourcing capabilities to offer P2P
Building broader S2P capabilities
Expanding sourcing-focused offerings
The PO report has over 15 supplier profiles and buyer
case studies
Source: Everest Research Institute (2008)
Appendix: Additional PO research recommendations
The following documents are recommended for additional insight on the topic covered in this Research Report. The
recommended documents either provide additional details on the topic or complementary content which may be of interest
For more information on this and other research published by the Everest Research Institute, please contact us:
Katrina Menzigian, Vice President: Saurabh Gupta, Research Director: PO team:
Phone: +1-214-451-3110
Email: info@everestresearchinstitute.com
Everest Research Institute
Two Galleria Tower
13455 Noel Road, Suite 2100 Dallas, TX 75240
kmenzigian@everestgrp.com sgupta@everestgrp.com POresearch@everestgrp.com
1. Outsourcing Order-to-Cash (O2C) and Procure-To-Pay (P2P) – Opportunity to Create Business Impact (ERI-2007-1-R-
0201); 2007. This research study investigates the business value and the market state of outsourcing O2C and P2P processes. The objective of the study was to identify the opportunity and the constituents of the business case for outsourcing, and analyze the solution components required to offer end-to-end O2C and P2P outsourcing offerings
2. Global Sourcing in PO (ERI-2007-1-R-0217); 2007. This study analyzes the key trends emerging in the offshore PO market
with a focus on offshore adoption in PO, role of global sourcing in PO, offshore supplier landscape, and the implications of global sourcing trends in PO for buyers and suppliers
3. Roadmap for Realizing the Savings in PO (ERI-2007-1-W-0212); 2007. This whitepaper discusses the issues with definition
and realization of savings in PO, key features of different mechanisms that exist in the market to address the issues, and best practices to consider
4. Procurement Outsourcing (PO) Annual Report 2006-2007 (ERI-2007-1-R-0154); 2007. This research analyzes the global
Everest Research Institute has the resources, experience, and capabilities to provide
companies with the strategic intelligence, analysis, and insight that are crucial to
making the right decisions in today’s outsourcing marketplace.
With the vision of our leadership team, the personal commitment, and indeed, the
passion of our professionals to deliver real value to our clients, our organization is
unsurpassed in its ability to guide your company’s future success.
Everest Research Institute
Two Galleria Tower
13455 Noel Road, Suite 2100 Dallas, TX 75240 U.S.A. +1-214-451-3110 www.everestresearchinstitute.com info@everestresearchinstitute.com Everest Australasia
Level 6, 90 Mount Street North Sydney, NSW 2060 Australia
+61-3-9833-1018
Everest India
Ground Floor, Tower A Unitech Business Park South City - I, Gurgaon National Capital Region India 122001
+91-124-304-1000
Everest UK
83 Baker Street London, W1U 6LA United Kingdom +44-87-0770-0270
Everest Group
150 E., 52nd Street, 16th Floor
New York, NY 10022 U.S.A.
+1-646-805-4000
Everest Canada
The Exchange Tower
130 King Street West, Suite 1800 Toronto, ON
Canada M5X 1E3 +1-416-865-2033
Everest Australia
409a Wattletree Road East Malvern
Melbourne, VIC 3145 Australia
+61-3-9509-3933
Everest Netherlands & Continental Europe
Atrium Building 3rd Floor
Strawinskylaan 3051 1007 ZX Amsterdam +31-20-301-2138
