The Hindu Business Line : Procurement outsourcing emerging as new growth area: Corbus

New stream
Procurement outsourcing is growing faster than the IT services, finance and accounting and HR services outsourcing market
It is growing at about 22 per cent annually and is poised to double in about four years

Hyderabad June 20 Procurement process outsourcing is emerging as a new growth area in the country and may even get identified as a new stream for Indian outsourcing services providers.

According to Mr Rakesh Mittal, President and COO of Corbus, procurement outsourcing market is growing faster than the IT services, finance and accounting and HR services outsourcing market, citing independent research studies, including that of IDC.

Further, outsourcing may also expose the client's spend, which can run in several hundreds of millions of dollars to risk. Speaking to Business Line, Mr Mittal said: "We are speaking to Nasscom to identify this as a separate stream of outsourcing. In fact, most of the major IT service providers are either already providing some services are looking at tapping this business opportunity."

He added: "Unfortunately, procurement outsourcing is misunderstood to be panacea for solving all the issues in procurement, which is obviously not true."

According to him, it started with the emergence of a lot of e-consolidators who talked about Web-based portals, which they claimed was the only thing required to reduce costs.

"This did not work. The real opportunity lies in a combination of several factors, which include technology platform, capability, outsourcing methodology and procurement experience."

Mr Mittal said that Corbus employs over 400 people in India and expects to expand to about 1,000 people while stepping up investments.

The company is also in the pursuit of some acquisitions and may even close one such deal in India during the year, he added.

The procurement outsourcing market, estimated at $1.1 billion, is growing at about 22 per cent annually and is poised to double in about four years.

The CAGR forecast for 2005-10 indicates that though procurement outsourcing was developed along with BPO, it is only now that this stream has shown growth in massive proportions.

The technology market for outsourcing is rather fragmented and is certain to move towards the software as a service (SaaS) model as is the general trend for application software market. Some of the companies have already moved to this area.

Mr Mittal said that the presence of auto majors such as Volkswagen, GM, BMW and Renault in India speaks about the potential for such services.

With India poised to be hub for outsourcing for aerospace and automotive companies, this space is likely to get a lot more exciting.