Procurement Outsourcing (PO)

Market Update: February 2008 – Preview Deck

Topic: Outsourcing the Procure-to-Pay (P2P) Process

Copyright © 2008, Everest Global, Inc.

ERI-2008-1-PD-0224
Background and methodology of the research

Background of the research:

The Procure-to-Pay (P2P) process represents a point of convergence between the finance and the
procurement functions. FAO buyers who have traditionally outsourced the transaction-intensive
Accounts Payable (AP) process are now looking at extending the value by expanding the scope of their
engagements to P2P. At the same time, buyers considering outsourcing their procurement function are
approaching P2P outsourcing as a stepping-stone towards full-service or Source-to-Pay (S2P)
outsourcing. As a result, we are witnessing a rising demand along with an expanding supply-base for
outsourced P2P services

In this research study, we investigate the business value and the market state of outsourcing the P2P
process. The objectives are to analyze the following:
„ Value proposition for outsourcing P2P

„ Solution characteristics of outsourced P2P

„ Impact on supplier landscape

„ Implications for buyers and suppliers

The research methodology is based on three key information sources:

„ An executive level Web-based buyer and supplier survey

„ Proprietary Everest database of multi-process PO contracts signed as of August 2007

„ Focused interviews with a diverse set of suppliers including Accenture, Genpact, IBM, Infosys BPO,

IQBackOffice, VWA, and Wipro

2
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
Table of contents (page 1 of 2)

Topic Page no.

Section I: Summary of key messages 5

Section II: Value proposition 6

„ Summary 7
„ Process definition 8
„ Typical savings from a PO contract 9
„ Outsourcing value proposition by process scope 10
„ Satisfaction levels of buyers that have outsourced AP 11
„ Five-step roadmap to realize savings in S2P outsourcing 12
„ Pain-points in buyer’s financial supply chain 13
„ Buyer interest in outsourcing P2P and demand by sub-process 14
„ Key challenges in moving from a piecemeal to an end-to-end outsourcing approach 15

Section III: Solution characteristics 17

„ Summary 18
„ Convergence between F&A and procurement functions 19
„ Applicability of value creation levers for PO by process scope 20
„ P2P offerings by industry focus and category focus 21
„ Degree of offshoring in PO contracts by process scope 22
„ Existing and potential degree of offshoring in P2P 23
„ Technology solutions/services required from suppliers 24
3
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
Table of contents (page 2 of 2)

Topic Page no.

Section IV: Supplier landscape 25
„ Summary 26
„ Supplier market shares 27
„ PO supplier capability across outsourcing value levers 28
„ Shifts in PO supplier landscape driven by demand for P2P outsourcing 29
„ Supplier interest and maturity in outsourced P2P services 30
„ Investments in delivery capability 31
z Acquisitions 32
z Partnerships 33
z Internal investments 34

Section V: Implications for key stakeholders 35

„ Implications for buyers 36
„ Implications for suppliers 38

Appendix 40
„ Supplier profiles 41
„ Buyer case studies 55
„ Web-based survey: response profile 57
„ Glossary of key terms 58
„ Research references 62
4
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
Overview and abbreviated summary of key messages
(page 1 of 2)

This report examines the expanding market opportunity around the outsourcing of Procure-to-Pay (P2P)
processes. It focuses on identifying the emerging value proposition of an end-to-end approach in
addressing converging buyer requirements between the F&A and procurement processes. Based on
extensive primary research, including a buyer survey and in-depth supplier interviews, this study
explores perspectives on adoption trends, solution components, supplier capabilities, and the supplier
landscape. The study concludes with Everest’s assessment of implications for buyers and suppliers,
addressing both opportunities and challenges. Finally, this report also provides over a dozen profiles of
the P2P offerings of specific suppliers, along with case studies.

Some of the findings in this report, among others, are:

Value „ Outsourcing P2P can create business impact beyond a direct-cost impact by
proposition addressing the pain-points in a buyer’s financial supply chain
„ Despite the value proposition, organizational, technological, solutioning, and
contractual challenges impact adoption rates of P2P outsourcing

Solution „ Moving beyond labor arbitrage, process efficiency and effectiveness, along
Characteristics with technology applications are increasingly emerging as key value creation
levers in P2P outsourcing
„ Technology is fast becoming a pivotal component of most PO engagements.
End-to-end technology solutions are gaining more importance as the scope
expands from AP to P2P
5
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
Overview and abbreviated summary of key messages
(page 2 of 2)

Supplier „ The emerging P2P opportunity is serving as a point of entry into the PO
landscape market for FAO centric suppliers expanding solutions bottom-up from AP to
P2P and offshore centric suppliers leveraging existing global sourcing
capabilities to offer P2P. However, the maturity of end-to-end offerings varies
by sub-processes
„ Most suppliers that offer or plan to offer P2P services are making
investments in building delivery capability through acquisitions, partnerships,
and internal investments

6
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
This study offers five distinct chapters providing a deep
dive into key aspects of the P2P market; below are four
charts to illustrate the depth of the report ILLUSTRATIVE
Pain-points in buyer’s financial supply chain Supplier landscape
Percentage response Less important Serving as a point of entry into the PO
Moderately important market Building broader S2P capabilities
Very important
FAO centric suppliers expanding Expanding sourcing-focused offerings
Critical solutions bottom-up from AP to P2P
XX% XX% XX% XX%
High manual intervention
Large number of paper invoices
Lack of data visibility Offshore centric suppliers leveraging Enhancing existing S2P offerings
existing global sourcing capabilities
Large working capital to offer P2P
Large number of disputed invoices
Long lead time to close books
Large write-offs due to aging

Horizontal vs. industry-focused P2P offerings Investments in P2P delivery capability

Number of suppliers 1a
Scale/expertise
1 driven
Acquisitions
1b
100% = XX Technology
driven
2a Process driven
Industry-focused Investments in 2
Partnerships
XX% P2P delivery
2b
capability Technology
driven
XX% 3a
People/process
Horizontal 3 driven
Internal
investments 3b
Technology
driven

Source: Everest Research Institute (2008)

7
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
The PO report has over 15 supplier profiles and buyer
case studies
ILLUSTRATIVE

Source: Everest Research Institute (2008)

8
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
Appendix: Additional PO research recommendations

The following documents are recommended for additional insight on the topic covered in this Research Report. The
recommended documents either provide additional details on the topic or complementary content which may be of interest

1. Outsourcing Order-to-Cash (O2C) and Procure-To-Pay (P2P) – Opportunity to Create Business Impact (ERI-2007-1-R-
0201); 2007. This research study investigates the business value and the market state of outsourcing O2C and P2P processes.
The objective of the study was to identify the opportunity and the constituents of the business case for outsourcing, and analyze
the solution components required to offer end-to-end O2C and P2P outsourcing offerings

2. Global Sourcing in PO (ERI-2007-1-R-0217); 2007. This study analyzes the key trends emerging in the offshore PO market
with a focus on offshore adoption in PO, role of global sourcing in PO, offshore supplier landscape, and the implications of
global sourcing trends in PO for buyers and suppliers

3. Roadmap for Realizing the Savings in PO (ERI-2007-1-W-0212); 2007. This whitepaper discusses the issues with definition
and realization of savings in PO, key features of different mechanisms that exist in the market to address the issues, and best
practices to consider

4. Procurement Outsourcing (PO) Annual Report 2006-2007 (ERI-2007-1-R-0154); 2007. This research analyzes the global
2006-2007 PO market and provide insights, detailed analyses and implications for stakeholders along three key dimensions -
Market size and buyer adoption, transaction characteristics and value proposition, and supplier landscape

For more information on this and other research published by the Everest Research Institute,
please contact us:
Katrina Menzigian, Vice President: kmenzigian@everestgrp.com
Saurabh Gupta, Research Director: sgupta@everestgrp.com
PO team: POresearch@everestgrp.com

Everest Research Institute

Two Galleria Tower
13455 Noel Road, Suite 2100 Phone: +1-214-451-3110
Dallas, TX 75240 Email: info@everestresearchinstitute.com
9
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224
Get the answers today that lead to tomorrow’s
success
Everest Research Institute has the resources, experience, and capabilities to provide
companies with the strategic intelligence, analysis, and insight that are crucial to
making the right decisions in today’s outsourcing marketplace.

With the vision of our leadership team, the personal commitment, and indeed, the
passion of our professionals to deliver real value to our clients, our organization is
unsurpassed in its ability to guide your company’s future success.
Everest Research Institute Everest India
Two Galleria Tower Ground Floor, Tower A
13455 Noel Road, Suite 2100 Unitech Business Park
Dallas, TX 75240 South City - I, Gurgaon
U.S.A. National Capital Region
+1-214-451-3110 India 122001
www.everestresearchinstitute.com +91-124-304-1000
info@everestresearchinstitute.com

Everest Australasia
Everest Group
Level 6, 90 Mount Street
150 E., 52nd Street, 16th Floor
North Sydney, NSW 2060
New York, NY 10022
Australia
U.S.A.
+61-3-9833-1018
+1-646-805-4000

Everest Canada Everest UK Everest Netherlands & Continental Europe Everest Australia
The Exchange Tower 83 Baker Street Atrium Building 3rd Floor 409a Wattletree Road
130 King Street West, Suite 1800 London, W1U 6LA Strawinskylaan 3051 East Malvern
Toronto, ON United Kingdom 1007 ZX Amsterdam Melbourne, VIC 3145
Canada M5X 1E3 +44-87-0770-0270 +31-20-301-2138 Australia
+1-416-865-2033 +61-3-9509-3933
10
Copyright © 2008, Everest Global, Inc.
ERI-2008-1-PD-0224