Everest Research, Finance, Outsourcing, Market, Offshore
Everest publishes F&A Outsourcing market update
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Offshoring has become fundamental to finance & accounting outsourcing (FAO), with every multi-process FAO contract (see note) signed in 2004 and 2005 featuring an offshore component. This and other key findings were reported by Everest Research Institute in its FAO Market Update.
"Finance & accounting outsourcing is mostly about direct cost savings, and offshore -- offering a significant labor arbitrage opportunity -- has become a fundamental component of the FAO model," said Joe Fernandes, Managing Research Director at Everest Research Institute. "This is the case across virtually all major geographic markets and industry segments. We're finding that after call centers, F&A is the most offshored business process."
To meet growing demand, FAO suppliers have been steadily expanding their offshore capabilities. The graph and table above show the increasing investments that the largest FAO suppliers -- Accenture, Computer Sciences Corporation (CSC), Electronic Data Systems (EDS) and IBM Global Services have made in the past three years.
According to the report, direct cost savings captured through offshoring include lower labor costs, lower costs of real estate and overheads, and greater utilization of labor and infrastructure as a result of increased work hours and multi-shift operations. "These cost savings vary significantly by offshore location," Fernandes added. "Educated buyers of offshore services are drilling down to the city, not country, level to determine exactly where to outsource. Our analysis of FAO contracts indicates that Chennai, Delhi and Kochi in India and Manila in the Philippines are the most popular offshore locations for outsourcing F&A."
Editor's Note: Multi-process FAO contracts are defined as involving two or more processes, a minimum of three years in contract length and at least $1 million in annual contract value. FAO contracts that do not meet these minimum requirements tend to have marginal impact on the changing market landscape, and are therefore not included in Everest Research Institute's market analysis.
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