What will be the future game-changers for F&A outsourcing?
Buyers, providers, advisors, analysts, and market watchers alike know that finance and accounting (F&A) has never been the frontrunner outsourced business process function. Yet, market research and KPMG client experiences show that F&A is picking up outsourcing steam.
According to analyst firm HfS Research, F&A outsourcing (FAO) will grow eight per cent in 2013, that four out of ten buyer organisations plan to start or expand their FAO scope during the year, and that 43 per cent of businesses with greater than $5 billion in revenues plan to increase their FAO activity. KPMG attributes part of the growth to the success buyers are achieving through the use of selective outsourcing as a means to improve their efficiencies.
KPMG engagements teams advising on FAO efforts, and associated discussions with finance executives at client organisations, tell the larger F&A “2013 and beyond” story. Indeed, KPMG observes three key, and tightly interconnected, trends in the FAO market.
Although the use of FAO is expected to grow faster than ever before, buyer organisations will increasingly expand their use of a hybrid service delivery model, making FAO one of several integral components of their overall global business services (GBS) strategy. The hybrid model to be utilised varies among companies due to a variety of factors including size, appetite for risk, industry sector, etc., but may include in-house, shared services, offshore captive, outsourced, and cloud-based platforms and bolt-ons, either offered by service providers or procured internally.
One of the largest impacts on the F&A service delivery model is coming from cloud solutions – ERP-type offerings in the software-as-a-service (SaaS) model and SaaS-based point solutions processes such as the record-to-report process and collections management. The pay-per-use cloud model is extremely enticing to providers and buyers alike, as it substantially reduces service delivery expenses. And the very nature of cloud solutions gives buyers increasing flexibility in how they design their hybrid F&A delivery models.
There is a clear dividing line among the four top external service providers and the “challengers.” One of the primary contributors to the leaders’ success is their development of specialised vertical industry capabilities and use of FAO tools and technologies. This allows them to deliver increasing value to their clients, often at significantly lower price points when leveraging cloud-based solutions, and caters to buyers’ growing demand for sector-specific capabilities. Today’s dominant vertical markets for FAO services are technology, manufacturing, and banking, financial services and insurance (BFSI), while the up-and-comers include retail, media/publishing, public sector, and high-technology/telecommunications/software.
Clearly, those responsible for ensuring effective delivery of their organisations’ F&A processes have never had so many valuable, viable choices. At the same time, these exponentially increasing options create complexities around delivery models, management, and governance that decision-makers have never before had to consider. As a result, buyers much carefully investigate, weigh, and vet all model, provider, and cloud options before they make any changes to their F&A service delivery methodologies, operational models and underlying IT systems.
This article was co-authored with Ron Walker, Principal, KPMG US