Wednesday, October 05, 2005

Finance and Accounting Outsourcing expanding at rapid rate: Study


FINANCE and Accounting Outsourcing (FAO), which is estimated to have a total contract value of $12bn at present, is on a similar growth pattern as Human Resource (HR) outsourcing, a recent study claims.
Approximately 70 per cent of 108 multi-process FAO contracts have been signed since 2001 and it has reached a rapid growth stage, the report, prepared by Everest Research Institute at Houston, said.
"While much attention in the BPO marketplace has been given to HR outsourcing, FAO, which has been experiencing a similar growth pattern is quietly evolving regarding how Chief Financial Officers (CFO) manage the finance function," said Michel Janssen, Managing Research Director of Everest Research Institute. "This is not a market of high-profile deals and game-changing technology. FAO has been, and continues to be, primarily focused on labour cost arbitrage, as CFOs seek to move transactional processing out of their organisation," Janssen added.
He said this has led to a situation where off-shoring has become a key component of the majority of FAO contracts, which has "opened the door to a large number of suppliers, especially those that missed windows of opportunity in HR outsourcing".
"CFOs are doing their fair share of cost-cutting by using outsourcing to drive down the transaction processing costs of the corporate finance function," Joe Fernandes, Managing Research Director at the Institute, said.
"Unlike other areas of outsourcing, CFOs are not engaging in FAO relationships to gain access to advanced technology," he observed. "Rather, they are leveraging outsourcing`s ability to deliver significant cost savings and improvements in the area of compliance -- and it is the largest companies with the most complex corporate structures that are leading the way," Joe said.

The article sponsored by A-1 Technology Inc, dealing in software outsourcing and software development outsourcing.