Saturday, July 28, 2007

Maturing Finance & Accounting Outsourcing Market is Driving Innovation beyond Labor Arbitrage

Source: Businesswire

Everest Research Institute Study: Global Buyers Now Looking to Source Skills from Multiple Regions; 77 Percent of FAO Contracts Have Elements of Offshore Delivery

Findings from a new Everest Research Institute study reveal that among all outsourced General and Administrative functions, Finance & Accounting Outsourcing (FAO) has the highest rate of global sourcing adoption, with 77 percent of contracts having elements of offshore delivery. As operating models continue to improve and output quality rises, more global buyers are looking to source a growing number of skills from multiple regions, and suppliers are driving innovation beyond pure labor arbitrage to remain competitive.

“The FAO market, enticed by labor arbitrage-driven savings, launched into a ‘rapid-growth' phase beginning in 2002,” said Katrina Menzigian, Vice President, Everest Research Institute. “Today, the value proposition around offshoring in FAO is evolving in two key areas. First, we are seeing suppliers deliver on the promise of global sourcing by actively pursuing low-cost regions other than India, with Eastern Europe being a focus area. Second, Everest is increasingly seeing the inclusion of judgment-intensive processes, such as analytics and reporting, incorporated into the globally sourced components of FAO deals.”

The study, entitled “Global Sourcing in Finance & Accounting Outsourcing,” reveals that while labor arbitrage and productivity improvements can potentially save buyers between 30 and 40 percent on their direct-costs, these are one-time benefits which typically stagnate as the deal progresses. As such, buyers are seeking contracts with continuous improvement parameters and innovative sourcing models such as a combination of global sourcing, technology enhancements, and process improvements for optimal service delivery and ongoing cost savings.

“Now that buyers are looking beyond a one-time savings impact from labor arbitrage and sourcing their Finance & Accounting processes from a large, well-established pool of suppliers, they need to ensure careful evaluation to identify the solution that is best suited to their needs,” said Saurabh Gupta, Research Director, Everest Research Institute. “At the same time, suppliers need to boost their onshore resource base, invest in technological solutions and processes as well as develop expertise around key market segments in order to remain competitive and to provide incremental value to the buyer year on year.”

The study also recognizes key responsibilities for buyers. To identify a solution that fits their needs in this complex and competitive market, buyers must assess niche providers, delivery locations and global solutions. Buyers also will be responsible for co-driving innovation initiatives, such as engagement structuring and management, throughout the project lifecycle.

About Everest Research Institute

Everest Research Institute ( serves as a central source of independent and objective strategic intelligence, analysis, and actionable insight for leading corporations, service providers, and investors in the global outsourcing and offshoring marketplace. The Institute addresses both business process and information technology sourcing topics, providing the global outsourcing and offshoring community with information that empowers highly productive, sustainable sourcing strategies and relationships. The Institute’s distinguished Board of Advisors, senior executives and thought leaders oversee the Institute’s research agenda to ensure that it fully supports the business needs of corporations, service providers and investors.