Shared Services, Outsourcing, Finance, Accounting, Offshoring

Hackett: Shared service centers remain the preferred option for F&A

Despite the widespread attention and publicity paid to finance outsourcing, companies are doing very little of it today, and onshore or offshore shared service centers remain the preferred options, according to findings of a new Business Process Sourcing study from The Hackett Group, a strategic advisory firm. 

Hackett's study found that companies today outsource only 4% of all finance processes, while they turn to onshore or offshore shared service centers 65% of the time. Companies said they expected their use of outsourcing to more than double in the next three years, but reliance on shared service centers will increase slightly as well, and shared services is expected to remain the preferred sourcing alternative for finance by a wide margin.

While the majority of shared service center utilization is currently onshore, companies also said they planned to nearly double their use of offshore shared services over the next three years, from 7% today to 13%. This makes offshore shared services nearly twice as attractive as outsourcing to companies, today and in the near future.

"It's not hard to find people who will tell you that comprehensive or full-service outsourcing is a tremendous growth wave in finance right now. But our analysis tells a very different story," said Hackett Senior Business Advisory Penny Weller. "While companies are looking at expanding their use of outsourcing and offshoring, it represents an almost insignificant portion of their finance efforts today. In fact, it's the least popular sourcing option we looked at. Meanwhile, companies are seeing tremendous value in moving finance processes to shared service centers, and are making this their primary sourcing approach."

According to Hackett Senior Business Advisor Julio Ramirez, "There's no doubt that there are potential benefits to outsourcing finance, such as leveraging lower-cost labor or getting access to critical systems to enable process automation. But companies can get much of this benefit by taking a best practices-driven approach to shared services. Then, once they have streamlined and centralized, they often look at whether finance processes can be eliminated completely through technology, and sometimes consider selective outsourcing. But in most cases, companies see the perceived risks of outsourcing finance, led by compliance and control concerns and unknown total costs, as far outweighing the benefits."

Hackett's study, which looked at 11 finance process areas, also found a clear trend away from decentralized finance operations. Currently, companies reported that 27% of finance processes remain decentralized, making this the second most popular sourcing alternative. But in three years, companies said they expect this number to be reduced by more than half. At the same time, in addition to an increase in the use of shared services, companies said they expect to increase by 150% the number of finance processes that are fully automated.

To see the full version of this research, go to the Hackett Research Insight Center

Companies interested in participating in The Hackett Group's next annual Business Process Sourcing study can visit the following link to find and complete the survey form: www.thehackettgroup.com/surveys/sourcing