June 2008 - Dallas-based financial services firm Comerica recently announced that it outsourced its procurement to Accenture. Replacing internal resources, Accenture provides category management, strategic sourcing, invoice processing and travel and expense processing expertise and technologies as part of a seven-year deal.
"We believe this agreement will reduce our operating expense base, enhance our current procurement capabilities and enable more efficient growth," according to a prepared statement by Comerica executive vice president and chief financial officer Elizabeth Acton.
In outsourcing procurement, Comerica joins a limited but growing number of American and European corporations that have turned to outside expertise to cut internal costs of buying direct and indirect goods, operate finance and accounting or manage such other areas as human resources, information technology and call centers.
Outsourcing--and even off-shoring--of call centers is not unusual for travel management companies and other suppliers. But some corporations view the procurement of direct and indirect materials, and management of business practices as strategic assets, best managed inhouse.
Thus far, few of the major business process outsourcing (BPO) contracts have included travel-related functions. The most notable were signed by Proctor & Gamble and Unilever, which included travel as part of much larger business services outsourcing contracts with IBM. Travel components often emerge as indirect procurement outsourcing, or in the back-end finance and accounting outsourcing (FAO) that would include vendor payment and travel expense reimbursements.
A recent American Express/A.T. Kearney study of 66 Europe-based companies found that 45 percent of respondents had used outsourcing for some element of travel management and 24 percent said they intended to outsource in the next 12 to 18 months. However, among those who said they had used outsourcing, 38 percent outsourced travel booking and 14 percent outsourced value-added tax management and recovery.
| Spot buy/operational sourcing support
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53% |
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| Contract management
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47% |
|
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| Supplier identification
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47% |
|
|
Source: Aberdeen Group December 2007 survey of 265 companies
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The Comerica deal is one of dozens that BPO analyst firms NelsonHall and the Everest Research Institute expect to be signed this year. Omitting military contracts, the analysts forecast 20 percent to 22 percent growth in the BPO market.
"The multi-process FAO market continues to grow aggressively with approximately 65 new contracts being signed in 2007," stated Everest Research in a market report it issued in May.
In its "BPO Index" for March, NelsonHall identified 12-month growth in the value of such contracts of 118 percent, but noted that with the exclusion of two outsourcing contracts for the United States military valued at $17.4 billion, the year-on-year global growth was 20 percent. In an annual "Black Book of Outsourcing," consulting firm Brown-Wilson forecast that procurement outsourcing would reach $700 billion in 2008 as the market expands at a compound annual growth rate of 37 percent.
Among the other new deals this year, The Hertz Corporation signed a five-year procurement outsourcing agreement with ICG Commerce for professional services, equipment and automotive, facilities, transportation, information technology, benefits and marketing across North America and Europe. An ICG Commerce spokesperson said the contract included neither travel management components nor sourcing of air, car, hotel or agency services. However, the contract does require ICG Commerce to "leverage its partnership with Genpact, drawing on the company's deep Six Sigma experience and strong operational capabilities to support procurement processing in Europe." Separately, ICG Commerce and Genpact in May announced plans to collaborate on a "source-to-pay outsourcing solution" that relies on ICG Commerce's procurement expertise and Genpact's accounts payable capabilities across all categories.
Genpact was initially established as part of GE Capital to manage multiple business processes. Everest Research Institute today lists Genpact among five companies that it said hold 71 percent of the $2.2 billion finance and accounting outsourcing market-also including Accenture, ACS, Capgemini and IBM. In the procurement outsourcing space, Everest said five suppliers hold about 85 percent of that market: Accenture, Ariba, IBM, ICG Commerce and Xchanging.
The International Association of Outsourcing Professionals in April released its third annual Global Outsourcing 100 ranking of providers, based on 18 criteria that included size, growth, management capabilities, customer references and analysis of demonstrated competencies by judges.
The top 10 vendors in 2008 included: Accenture, IBM, Infosys Technologies, Sodoxo, Capgemini, Tata Consultancy Services, Wipro Technologies, Hewlett-Packard, Genpact and Tech Mahindra. Ranked 12th was EDS, which H-P plans to acquire. The complete list can be found on
IAOP's Web site.
