Finance and Accounting Outsourcing Set To Explode as Stable Service Provider Base Develops | Article
BPO processes are like children. While they are young and have great potential, they are maturing at different rates. Human resources (HR) is the most mature BPO process; finance and accounting (F&A), however, is not far behind. Historically, companies were more eager to give up payroll and payroll tax matters than they were to let a third party take control of their books.
F&A outsourcing has already celebrated its tenth birthday. BP led the way by outsourcing its F&A work to Accenture in 1991 and, during the last decade, leading service providers gained the history, context and actual experience to develop best practices in this area.
In the 1990’s, companies faced a fork in the road after they chose to outsource this business process.They could either outsource the process to a service provider, like BP did, or create a shared services center. During the last decade, the shared services option was the favorite choice.
The Shared Services Option Was the First Favorite
Companies elected to reengineer their business processes, plucking the F&A function from every division and moving it into a separate organization – a shared services center. This move produced the beneficial results of outsourcing: it improved the process, lowered the cost, produced more management oversight and installed better controls.
Once the operating results were in, boards of directors were pleased with the improved results. The initial success of a shared services operation convinced corporate leaders that it F&A was superior to keeping the process in house.
However, time began to erode these benefits. Companies discovered that a shared services center competed with other internal organizations for talent and capital. When it came time to upgrade the technology, some companies balked at the exploding cost.
When economic recession and international competition through the Internet became economic keystones, corporations sought greater savings from their shared services operations. But those savings were not possible through this approach.
The only way to generate the next level of sustainable savings was to outsource.
BPO Marketplace Is Exploding
Today, F&A outsourcing has taken off; in fact, I’d describe the marketplace as “exploding.”
The limited horizon of the shared services option is one reason. Quite a few companies with shared services centers have noticed the enviable results outsourcing has produced. They are now in the process of selling their shared services organizations so they can outsource to a service provider with best practices.
The other reason for this burgeoning BPO marketplace is that a plentitude of best practice service providers is now available. Today ACS, Accenture, Deloitte Touche, SourceNet Solutions and EDS are respected F&A suppliers with reputable track records. Stable service providers of all stripes are available to take over the growing workload.
Now the poker hand is different; today the ace is to outsource. Corporations have decided they want to forego the investment and cost of building their own shared services center and move directly and quickly into the transformation of a business function. By going directly to outsourcing, they leapfrog over companies that chose the shared services route.
The end result: Companies can reduce costs and gain better control and tighter oversight over their numbers by outsourcing F&A to an established service provider. These empowering results are lighting a fire under BPO.
Lessons from the Outsourcing Journal:
- While all BPO processes are still in the formative stages, F&A falls just behind human resources in process maturity.
- Originally, many companies chose to create a shared services center but have since opted to sell those centers and switch to an outsourcing strategy.
- Currently, outsourcing to a BPO service provider can provide greater savings and better results. Companies are bypassing the shared services route.
- Seasoned and stable BPO suppliers are available, which is helping the BPO market “to explode.”