According to a newly released IDC study, interest in procurement business process outsourcing (BPO) is at an all-time high as the worldwide procurement BPO market continues to grow. IDC estimates that the worldwide procurement BPO market reached $627 million in 2005, and will expand at a five year compound annual growth rate (CAGR) of 22.3 percent to reach $1.7 billion by 2010. The study reveals that growth in customer spending is accompanied by a more crowded and diverse competitive landscape, with more aggressive activity coming from newer entrants such as services procurement BPO providers and Indian offshore BPO providers.

"Procurement BPO is quickly coming into its own as one of the fastest-growing horizontal opportunities within the global BPO market, and has become accepted as a strategic business tool to help companies achieve competitive positioning and growth objectives," said Shruti Yadav, analyst for BPO Services at IDC. "IDC predicts a continuing trend of double-digit market growth and an increasingly diverse base of adopters. All the same, vendors need to be prepared for long sales cycles, an exacting buyer base, mounting expectations and ever-increasing competition."

The study finds that the Americas region currently hosts the largest share of spending in the global procurement BPO market, with the U.S. driving an overwhelming majority of spending in the region. The EMEA region is the second-largest contributor of market spending, followed by Asia/Pacific.

From a vertical perspective, the majority of procurement BPO spending will continue to be driven by a few industries, such as manufacturing, financial services, retail, and utilities. In addition, the study reveals the potential for experimental adoption of procurement BPO in verticals such as non-profit and government.

"The ability to grow and sustain share in this market will depend on depth of procurement domain expertise, global presence and delivery capabilities, ability to successfully manage outsourcing relationships, and demonstration of the actual business impact of Procurement BPO," Yadav added. "Vendors should continue efforts to substantiate and quantify the business impact of procurement outsourcing to the customer as well as the broader market."

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