Executive Summary: ISG Provider Lens™ Procurement Services - Global 2025
27 Apr 2025
by Tarun Vaid
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Technologies such as AI, GenAI and RPA drive transformation projects in core procurement operations
In today’s rapidly evolving global landscape, the need for greater efficiency, transparency and resilience drives the digital transformation of procurement. Global dynamics such as wars, rising tariffs and geopolitical unrest have led enterprises to make procurement a strategic priority as they seek to mitigate risks and ensure supply chain continuity. A prominent shift has been noted in the perception of procurement, from being viewed as a cost center a few years back to being regarded as one of the key innovation drivers. Globally, chief procurement officers (CPOs) are prioritizing technologies that enhance data analytics, automation and supplier collaboration and enable data-driven procurement decision-making.
Service providers are increasingly diversifying their offerings to include procurement operations modernization services, strategic sourcing and category management services, and supplier management and contract lifecycle management services. Each service line comes with its challenges, adoption patterns and anticipated future trends.
Globally, modern procurement services have become a cornerstone for enterprises seeking to drive efficiency, innovation and sustainability across their supply chains. This year’s assessment has observed almost 75 percent of service providers focusing on enhancing their source-to-pay (S2P) capabilities and considering procurement as a strategic business function that can potentially influence and transform end-to-end supply chain management (SCM)
value chain and the S2P ecosystem. Leaders are focusing on transforming procurement by integrating analytics, AI and automation, leveraging both proprietary and partner solutions. They are enhancing procurement using technologies such as AI, advanced analytics, RPA and generative AI (GenAI) and dedicated procurement CoEs to deliver highly customized and tailored solutions.
ISG observes that many leading service providers are shifting toward data democratization; they are using orchestration tools to help shift the focus of procurement from cost control to enabling better user experience, process agility and embedded compliance.
When asked about the key capabilities and functions that enterprise clients will prioritize in the near future, providers identified a strategic mix of standard procurement solutions (S2P), consulting-led approaches, AI-enabled solutions, sustainability and compliance. Clients are looking beyond cost savings toward optimized processes and faster time to market.
• Integration of AI and advanced technologies: Most leading service providers emphasized the growing need to integrate AI and GenAI into procurement processes to enhance efficiency, decision-making and operational outcomes.
• Focus on ESG and sustainability: Clients unanimously recognize the growing importance of ESG in procurement, which is reflected in their demand for sustainable practices and transparency. They are focusing on circular economy practices for the appropriate use of raw materials, carbon emission tracking, more resilient supply chains and ESG compliance.
• Demand for analytics and real-time insights: Service providers are consistently innovating their advanced analytics capabilities to offer more real-time insights and visibility into procurement processes, which is crucial for effective decision-making and strategic management.
• Talent development and upskilling: Service providers have agreed on the need for enhanced upskilling to keep pace with the evolving technological landscape and drive digital transformation initiatives. They prefer having a strategic mix of business and technology consultants, procurement domain experts and industry consultants.
• Enhanced security and risk management: With digital procurement on the rise, service providers are also prioritizing robust cybersecurity measures and integrating strong risk management capabilities within procurement frameworks. In the last 12 months, service providers, mainly the leading providers, have significantly increased their
R&D spend. They are focusing on more tailored offerings such as industry-specific solutions, hyperpersonalized services and technology-agnostic tools, such as GenAI, for supplier management and contract lifecycle management to improve efficiency and agility, make procurement more responsive and accelerate the time to market. Service providers are committed to transforming their traditional procurement functions and have significantly innovated their supplier management and collaboration services, integrated spend management solutions, risk management and change management. Such developments collectively address clients’ requirements for digitally transformed procurement operations, better visibility into spending and ethical procurement practices.
Procurement BPO and managed services enable flexible operations to fulfill their strategic expectations. Although procurement outsourcing activities continue to witness encouraging growth, references on end-to-end S2P transformation are limited owing to their siloed and fragmented nature. Most use cases of outsourcing activities are inclined toward spending data management, strategic sourcing, tail spend management, and supplier risk and performance management. Work around purchase requisition (PR) to purchase orders (PO) management, procurement technology management, asset management and sourcing governance has been minimal but is picking up pace.
ISG identifies the following key disruptive trends shaping the procurement services market, some of which have been continuing since 2024, as they enhance the efficiency of the procurement function.
• AI and automation adoption: Providers are integrating even more advanced capabilities such as AI, GenAI and
automation to streamline procurement with smart contracts, spend analysis and risk assessment, thus reducing manual tasks and increasing accuracy in decision-making.
• Data-driven insights: Advanced analytics capabilities provide granular visibility into spending patterns, supplier performance and market conditions, empowering CPOs with proactive and strategic decisionmaking capabilities.
• Strategic sourcing evolution: Strategic sourcing is recording an increase in outsourcing activity, emphasizing data
benchmarks, best practices and global reach. Providers are optimizing sourcing strategies to maximize value and enhance client-supplier relationships.
• Robust risk management: This framework identifies and mitigates supply chain vulnerabilities, ensures continuity
and minimizes disruptions. It enables proactive risk assessment with real-time data, enhances supplier reliability and
supports compliance. In an unstable global environment, it ensures procurement resilience and sustainability.
• Circular procurement: Circular economy in procurement emphasizes sustainability by reducing waste, reusing resources and recycling materials in the supply chain. This trend is crucial to reducing environmental impact, complying with regulations and achieving long-term cost savings. It drives innovation in sourcing strategies, enhances
brand reputation and meets growing consumer demand for eco-friendly practices, thus ensuring business resilience.
Based on ISG’s discussion with over 25 procurement service providers, we forecast that over the next 12-24 months, the procurement services market will witness an increasing use of advanced AI, predictive analytics and modern tools for efficiency improvements and strategic value. Clients will emphasize refining sourcing practices, enriching UX and fortifying supply chain collaboration for better agility, compliance and risk management. The market will also see end-to-end data utilization and innovative solutions driving transformation and value creation through better data orchestration. Meanwhile, consulting capabilities will be key service provider selection criteria, wherein providers must offer a healthy mix of strategic and technology consulting. Capabilities around risk management, change management, transformation readiness check, assessment and process intelligence will also be critical for both enterprise clients and providers. With rising geopolitical unrest and uncertain economic conditions, industrial operations are expected to slow down, which may lead to delays in overall procurement transformation projects. Such conditions will give providers the opportunity to showcase their initiatives on short-term cost savings and their ability
to nurture client loyalty and engagement by prioritizing customer preferences and fostering hyperpersonalized experiences while driving positive outcomes.
The market competition among Accenture, GEP, WNS Procurement, Genpact, Infosys and IBM is intense, with each provider showcasing robust capabilities. Differentiation now hinges on their client-centric approaches, global delivery models, growth trajectories and expertise depth. With all contenders offering strong solutions, the competition ultimately depends on who best meets client needs and adapts to market demands.
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