A collapse in business confidence due to the global downturn has slowed revenue growth in the Procurement Outsourcing Services industry over the five years through 2012-13. The industry is expected to post healthier growth over the five years through 2017-18 as an expected recovery in the number of businesses outsourcing will support revenue growth.
The Procurement Outsourcing Services industry faced challenges in a shrinking market over the five years through 2012-13. Industry revenue is estimated to decline by an annualised 1.1% over the period to reach £2.53bn. The industry’s market shrank as the number of businesses in the United Kingdom fell. The remaining businesses were also wary of their financial outlook and were less likely to invest in new procurement processes, which cut demand for industry services. On the other hand, business customers were inclined to outsource their procurement function as they strived to find greater efficiencies in a competitive environment. As such, the industry benefitted from a countercyclical trend. The greater IT and telecommunications adoption of business has also made the outsourcing of procurement functions easier.
According to IBISWorld industry analysts Aries Nuguid, “a collapse in business confidence due to the global downturn has slowed industry revenue growth over the five years through 2012-13”. As companies became less confident in their financial outlook, procurement activity slowed, which hurt demand for industry services. Poor business confidence also caused a mismatch between capacity in the industry and demand for industry services. This heightened competition between industry operators and pressured operating margins.
Industry revenue is expected to grow by a solid 3.2% in 2012-13. Nuguid adds, “the popularity of outsourcing as businesses strive for greater efficiency is expected to back the growth in industry revenue”. An expected expansion in capital expenditure by the private sector during the year will also support demand for procurement outsourcing services.
The industry is expected to post healthier growth over the five years through 2017-18. A recovery in number of businesses outsourcing will support revenue growth over the period. Business confidence is forecast to improve, which will boost procurement activity, some of which will be outsourced to the industry. Furthermore, the forecast resumption of growth in capital expenditure on new capacity and processes will increase demand in the industry. The restored demand and better match with service capacity will enable wider profit margins.
The Procurement Outsourcing Services industry exhibits a low level of market share concentration, with the four largest players estimated to generate less than 30% of industry revenue. The industry is dominated by small enterprises. At one end of the spectrum are niche operators providing procurement services to specialised industries and clients. At the other are well-known consulting brands with a small footprint in the industry that functions as a value add to larger supply chain consulting services. Major companies include Capita and Xchanging.
Source:http://www.sharedserviceslink.com/file/95637/outlook-for-procurement-outsourcing-services-in-the-uk-industry-market.html
