Finance and Accounting Outsourcing Trends 2015
One of the very first business processes to be outsourced by companies was finance and accounting. Over the years, finance and accounting outsourcing (FAO) continues to grow. The past year saw a growth of 7-8%1 in the FAO market despite the fact that global economy is still in a recovery mode. However there has been a marked difference in the way outsourcing is being viewed in recent years vs. the early years. The value proposition for FAO is growing beyond cost reduction, to focus on process transformation, to measure business impact and to enable world-class performance.
- Research carried out by Everest Group1 showed finance and accounting outsourcing market realized moderate yearly growth of about 8% to reach US$ 4.6 billion in Annual Contract Value (ACV)
- Indian IT and BPO providers witnessed maximum growth in the year
- Accounting outsourcing by small medium businesses (SMB) have gained a significant attraction in the year, while United States continue to be the principal adopters of FAO
- Buyers are increasingly focused on high end value propositions and are willing to change providers to get it
- Robotic automation emerged as a disruptive technology solution to drive benefits across multiple dimensions – cost savings, efficiency, accuracy, scalability, and compliance
- Cloud computing coupled with off the shelf VOIP and remote access technologies have sharply driven down the technological costs associated with outsourcing
Value Proposition Moving Beyond Cost Savings
FAO value proposition is moving beyond cost reduction. Now, service providers are increasingly being asked to explain how their services are adding value to the overall operations of the buyer. There has been an increased focus on simplification and automation of the entire or sub components of the process. Reduced costs and improved performance of optical character recognition (OCR) software has made outsourcing redundant in some basic processes while catalyzing outsourcing in other more heavy data processes. Conversely,
End to End Solution and Industry Specificity
The scope definition of outsourcing engagements is evolving along three broad themes – end-to-end process-driven approach, industry-specific (vertical), and expansion into adjacent functions. Buyers are now looking for a more holistic outsourcing solution – where an entire function is handled by the service provider, such as providing Procure-to-Pay rather than a piecemeal payables function. According to a recent published industry reports, industry focus has emerged as a key differentiator in the FAO market. The buyers are keenly looking at service providers who can provide industry relevant FAO solutions along with the ability to expand into adjacent functions.
Cloud based solutions are now making seminal impact on outsourcing process flows and technologies. The impact is on multiple dimensions. Data-storage tools and sites such as Drop-box, Google Drive and Amazon web services (AWS) have eliminated the need for having dedicated storage servers. Virtual meetings tools such as GoToMeeting, Micorsoft Lync has facilitated interactive working, virtual training (with recorded sessions) and better communication. The adoption of web-based ERP and accounting packages has galloped ahead in recent years, making outsourcing easy to implement. Another allied development is the easy online access of most data-items involved in common FAO processes such as AP, reconciliation etc. For instance, bank, credit card, mortgage, line of credit accounts are all easily accessible online (with differential access rights) eliminating the need for scanning significant amount of data. The increasing popularity of online document management systems such as Avid Exchange further facilitates outsourcing. The cumulative impact of these technological changes is to make process transition faster, lower the technology cost and reduce the efforts required to get outsourcing going.
Mobile and Smart Phones
The ubiquity and improved optical performance of smart phones is make outsourcing feasible and doable for the micro and small business segment. Images are readily captured on the phone and uploaded on data sharing tools such as Drop-box or Google drive to an accountant based in offshore locations. Certain applications have also been developed which are useful for reporting related issues and escalation.
Trends in finance and accounting outsourcing are changing considerably as both outsourcing service providers and clients are moving towards higher expectations and demands for outsourced services. Service provider investments in the year will primarily be focused on technology, including tools/platforms, analytics, and robotic automation. These changing trends will certainly offer new opportunities for finance and accounting outsourcing service providers in 2015-16.
If you are interesting in knowing more about how outsourcing can help your organization, please email us at firstname.lastname@example.org or call us at 1-646-367-8976. We can also provide a cost-benefit analysis customized for your organization.
1. Everest Group