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Everest Predicts more FAO Activity this Year

by: Sarah Joson

Wednesday, May 9, 2012 | Outsourcing News |

Finance and Accounting Outsourcing

In a press release published at news.yahoo.com, consultancy and global services research firm Everest Group expects the Finance & Accounting Outsourcing (FAO) market to bounce back with a 10-15 percent growth rate and is seen to post $4 to $4.5 billion in annual contract value (ACV) this year.

According to Everest’s Finance & Accounting Outsourcing Annual Report 2012, ACV in 2011 increased by 11 percent, though it is lower than the 18 percent growth reported in 2010.

Everest Group’s Vice-president Saurabh Gupta said even if the market was not able to meet growth levels last year, there were still a lot of strong market indicators such as the 200 contracts which are up for renewal and new transactions. However, fewer multi-processing contracts were seen because of the shift in the purchasing behaviour of clients. They are now more cautious, trying to avoid as many risks as possible. All in all, outsourcing is still a solution for high operating and labor costs, but this time, it can also address other challenges in business strategies and streamline core processes.

These are the other highlights from the report:

  • The FAO market is seen to post continuous growth. Sixty percent of last year’s FAO transactions are from manufacturing, financial services, high tech and telecom, and professional services accounting industries.
  • The Asia-Pacific region is rapidly becoming a credible market for FAO processes. The US, on the other hand, is responsible for more than half of the total number of FAO contracts last year.
  • More FAO contracts from firms with revenues which are less than $5 billion were awarded last year at 60 percent, compared to 2008-2010 at 40 percent. SMBs, on the other hand, doubled FAO contracts.
  • With almost 50 percent of new FAO contracts signed for end-to-end processes in 2011, it just goes to show that buyers are now looking for far-ranging business solutions rather than quick fixes.
  • Delivery centers are now more physically accessible and are bringing FAO processes onshore.

Gupta noted that competition in the FAO market is getting tougher. Proof of that is the sudden drop of market share of the top three providers from 65% to 50% within five years. Also, FAO providers were seen to invest more on technology.

 

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