Interest in procurement BPO is at an all-time high as the worldwide procurement BPO market continues to grow. A recent study conducted by IDC estimates that the worldwide procurement BPO market reached $627 million in 2005, and will expand at a five year Compound Annual Growth Rate (CAGR) of 22.3% to reach $1.7 billion by 2010.

The study reveals that the growth in customer spending is accompanied by a more crowded and diverse competitive landscape, with more aggressive activity coming from newer entrants such as services procurement BPO providers and Indian offshore BPO providers. According to the study, “Procurement BPO is quickly coming into its own as one of the fastest-growing horizontal opportunities within the global BPO market, and has become accepted as a strategic business tool to help companies achieve competitive positioning and growth objectives,” said IDC in a statement.

IDC predicts a continuing trend of double-digit market growth and an increasing diverse base of adopters. The study report indicates that vendors need to be prepared for long sales cycles, an exacting buyer base, mounting expectations and ever-increasing competition.

The American region currently hosts the largest share of spending in the global procurement BPO market with the U.S.A. driving an overwhelming majority of spending in the region, according to the study. The EMEA region is the second-largest contributor of market spending, followed by Asia-Pacific.

From a vertical perspective, the majority of procurement BPO spending will continue to be driven by a few industries, such as manufacturing, financial services, retail, and utilities. In addition, the study reveals the potential for experimental adoption of procurement BPO in verticals such as non-profit and government.