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Survey rates outsourcing effectiveness
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Seventy-five percent of U.S. and European multinational companies now use outsourcing or shared services to support their financial functions and will continue to do so over the next 12 to 24 months, although less than half consider outsourcing to be cost effective, a PricewaterhouseCoopers survey shows.
While executives agree that outsourcing or shared services are important to their company’s growth, they are divided about its effectiveness. Thirty-eight percent of Europeans report the benefits their company derives from outsourcing are better than initial expectations and 46 percent rate them about on par; only eight percent rate them worse. Just 20 percent of U.S. executives believe the benefits are better than expected, 61 percent rate them on par, and 10 percent consider them worse."Many multinational companies that outsource financial functions do not find it to be cost effective," said Dan DiFilippo, Global Leader for Performance Improvement and U.S. Leader for Governance, Risk and Compliance, PricewaterhouseCoopers. "Companies that turn to outsourcing for cost savings should conduct comprehensive feasibility studies to better understand their potential return on investment. Many companies enter outsourcing arrangements without conducting a proper cost-benefit analysis."
The survey shows a marked difference in the financial functions that these multinationals have, or are planning to outsource, within the next 12 to 24 months. For example, in the U.S. the top two outsourced financial functions are payroll/billing/accounts payable (74 percent) and benefits/claims administration (70 percent).
In Europe, however, the top two functions are IT/systems support (70 percent) and tax services (59 percent) with payroll/billing or accounts payable services trailing (48 percent).
U.S executives said those financial functions that have reaped the greatest benefits from outsourcing are security/privacy; control; timing/timeliness; and ability to deal with compliance issues. Yet overall quality and cost-saving benefits received predominantly mixed ratings.
Overall, 29 percent of U.S. and European companies expect to increase their use of outsourcing of financial functions, with spending expected to be nearly 16 percent higher than current levels.
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