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7 Trends to Watch in F&A Outsourcing

by: Admin

Friday, October 29, 2010 |

Developments in Finance & Accounting Outsourcing

Along with the advent of BPO came the popularity of Finance and Accounting (F&A) Outsourcing. This is usually the first choice of offshore service for people seeking to reduce cost in back office functions. However, word on the street is that most business owners who have outsourced F&A tasks are not pleased with the services they have received. Alsbridge Inc. argues against this as they foresee trends that will increase F&A Outsourcing activity.

Increasing penetration. F&A Outsourcing has not reached all industries and there are a lot of avenues where it can still prove to be useful. Untapped fields like retail and investment banks and SMEs have yet to be included in the targeted market segments of outsourcing providers.

Up the value chain.
  Finance activities that can be outsourced are becoming more and more complex. Gone are the days when only simple bookkeeping and data entry tasks can be accommodated. Strategic audits, reports, and analysis are now being outsourced and the list of services under F&A Outsourcing is continuously growing.

Harsher competition.
There is an increasing number of high quality service providers that choose to specialize in F&A Outsourcing. New entrants in India are changing the landscape and a lot of companies follow suit in employing innovation in their service offerings. Alsbridge predicts alliances to be formed as the industry reaches maturity.

Offshore acceleration.
The industry has been totally redefined by outsourcing. It has been found out that 60% of global players outsource to India. It is safe to assume that in today’s business environment, it is the norm to outsource finance and accounting functions.

Buy-side sophistication. A big percentage of firms that outsource finance and accounting activities are on to their second F&A deal. This implies that they are more knowledgeable about the market and they have preferences when it comes to service delivery models. A more informed market in a very competitive landscape increases the bargaining power of consumers, further resulting to lowering prices. Flow of deals in finance and accounting outsourcing is generally slow, except for some providers who take advantage of the situation and offer below market rates to attract revenue growth.

More F&A captive sales. More and more companies choose to establish an entire F&A team offshore. Divestments, however, are becoming more common as companies take advantage of the flexibility offered by outsourcing.

SAAS. Software-as-a-Service and cloud-based solutions are gaining influence in the industry. Software programs for finance and accounting used to be unaffected by technological advancement. This is currently changing because a number of suppliers offer standardized platforms for F&A services.

It is clear that the face of Finance and Accounting Outsourcing is developing to a more competitive segment. These trends show that the industry has not become stagnant and a lot of opportunities will keep growth and advancement at a steady pace. 

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