The adoption of procurement business outsourcing is not widespread in Australia but rather is still discrete in nature and will remain so over the next couple of years, according to surveys by IDC.

"Although IDC has observed a strong interest in outsourcing procurement activities, especially within the sourcing sub-segment, it is primarily within the 500-plus employee companies. Even within this market segment, there are still small-scale engagements and the overriding driver remains cost management," said Aprajita Sharma, IDC's research manager for outsourcing and BPO services

IDC estimates that the Australian procurement business services market will increase at a four-year compound annual growth rate (CAGR) of 18 per cent to approximately $A534 million by 2011.

"The market is not ready for comprehensive procurement BPO. However, it is still important to consider the smaller scale engagements -- as BPO deals increase over time in scope and complexity, these smaller engagements allow firms to gain a foothold within the marketplace," Sharma said.

"It is also critical to identify relevant trigger events for procurement BPO adoption, for example F&A outsourcing could be a lead-in for procurement BPO as some large customers look at cross-functional integration of the accounts payables and accounts receivables," she added.

Len Rust is publisher of The Rust Report.