Procurement as a service is an outsourced procurement model that combines technology, staff, and expertise to handle a portion of the organization's procurement function. A large number of organizations rely on digital technology to carry out procurement and sourcing functions as well as track payments and purchases. Moreover, digital procurement is the application of disruptive technologies in order to enable automation of transactional procurement. It further enables processes such as strategic sourcing and supplier management to become predictive and proactive, further reducing operational costs.
Growing demand among organizations to streamline the procurement process and the imminent need to handle compliance policies and contracts are the factors propelling the market growth. However, growing concerns for data security and privacy among the enterprises hinder market growth.
The procurement as a service market was valued at USD 5.5 billion in 2019 and is expected to grow with a CAGR of 7.4% during the forecast period.
Growing Need to Streamline the Procurement Process among Organizations
Over the past few years, increasing penetration of advanced technologies across different industry verticals is the leading factor fueling the demand for procurement services. Furthermore, awareness about the procurement process among organizations has increased over the past few years. Thus, as consumers are becoming more aware of advanced procurement functions in their respective businesses, they are expected to look for providers that offer a robust procurement service model. Moreover, the use of intelligent automation within the procurement processes is also one of the factors escalating the market growth among enterprises.
Umpteen Services Offered by Strategic Sourcing to Drive Its Adoption among the Organizations
The strategic sourcing segment holds the highest market share and is anticipated to continue the same during the forecast period. Strategic sourcing includes activities, such as taking into account an organization's external spend and using external spend information to formulate an overall strategy for the organization's purchases. It also includes conducting the request for quotation or request for proposal process, negotiating prices with suppliers, and setting up contracts. Furthermore, the strategic sourcing service providers have expertise in various sourcing activities and offer procurement as a service market to the enterprises for streamlining their sourcing operations. Moreover, it involves regular reporting of spending patterns within each category, which allows an organization to maintain the latest information on spending.
Increasing Awareness among the Enterprises Regarding the Use of Procurement as a Service Drives the Market Growth
SMEs are the fastest-growing segment in the adoption of procurement as a service due to increasing awareness among the enterprises regarding the use of procurement as a service to eliminate the expenditure associated with technology deployment and staff contracts. Furthermore, large enterprises are adopting procurement as a service to reduce operational costs and eliminate their complexities. Additionally, the prime factor that leads to the surge in adoption of procurement as a service is the increase in efficiency and productivity. However, integration issues with legacy systems hinder the market growth.
Manufacturing Segment Is Anticipated to Witness Growth during the Forecast Period
The manufacturing segment is anticipated to witness growth during the forecast period on account of the growing demand for cost-effectiveness in the supply chain and the need for shorter production times. Furthermore, increasing investment to upgrade the infrastructure services to enhance efficiency and productivity and meet the increasing demand of customers in a shorter time drives the market growth. For instance, in March 2020, CHENIERE ENERGY, INC., The United States' largest LNG Exporter has implemented GEP procurement software to drive optimum efficiency, agility, visibility, and actionable intelligence into all procurement and purchasing functions, while eliminating burdensome infrastructure and support costs, to achieve maximum ROI.
Impact of COVID-19
COVID-19 has affected millions of businesses and disrupted the supply chains, right from the SMEs, to the multi-billion dollar large enterprises; all have taken a major setback in their businesses. At a time like this, procurement professionals are facing the brunt of their management for getting the supply chains up and running, despite the lockdowns and disruptions in logistics. As result, vendors providing logistics and transportation services, or a vendor supplying medical utilities, take up the advantage of this situation and surge their pricing. However, vendors offering procurement services have taken some of the initiatives amid COVID-19 to respond effectively to immediate and post-pandemic world challenges. This includes;
Increasing Awareness Regarding Streamlining of Supply Chain Processes Drives North America's Market Growth
North America dominates the procurement as a service market during the forecast period as the region is an early adopter of advanced technologies. Furthermore, increasing awareness regarding the streamlining of supply chain processes is one prime factor propelling the market growth in the region. Moreover, the presence of a large number of giant companies offering procurement as a service is also one of the factors propelling market growth. However, third party dependence and outages are substantial factors responsible for restraining the market growth.
Asia-Pacific to Be the Fastest Growing Market for Procurement as a Service
Asia-Pacific is the fastest-growing market for procurement as a service on account of the increasing awareness among the enterprises regarding the benefits of procurement as a service. Furthermore, increasing SMEs among the developing countries, such as China and India, on account of various government initiatives, such as Make in India and Self-Reliance initiatives, foster market growth.
Procurement as a Service Market: Segmentation
By Organization Size
By Industry Vertical
The Middle East and Africa (MEA)
Frequently Asked Questions (FAQs)