July 26, 2007

Maturing Finance & Accounting Outsourcing Market Is Driving Innovation Beyond Labor Arbitrage

Everest Research Institute study: Global buyers now looking to source skills from multiple regions; 77 Percent of FAO contracts have elements of offshore delivery

DALLAS, July 26, 2007 - Findings from a new Everest Research Institute study reveal
that among all outsourced General and Administrative functions, Finance & Accounting
Outsourcing (FAO) has the highest rate of global sourcing adoption, with 77 percent of
contracts having elements of offshore delivery. As operating models continue to improve
and output quality rises, more global buyers are looking to source a growing number of
skills from multiple regions, and suppliers are driving innovation beyond pure labor
arbitrage to remain competitive.

The FAO market, enticed by labor arbitrage-driven savings, launched into a
‘rapid-growth' phase beginning in 2002,” said Katrina Menzigian, Vice President,
Everest Research Institute. “Today, the value proposition around offshoring in FAO is
evolving in two key areas. First, we are seeing suppliers deliver on the promise of global
sourcing by actively pursuing low-cost regions other than India, with Eastern Europe
being a focus area. Second, Everest is increasingly seeing the inclusion of judgmentintensive
processes, such as analytics and reporting, incorporated into the globally
sourced components of FAO deals.”

The study, entitled “Global Sourcing in Finance & Accounting Outsourcing,” reveals that
while labor arbitrage and productivity improvements can potentially save buyers between
30 and 40 percent on their direct-costs, these are one-time benefits which typically
stagnate as the deal progresses. As such, buyers are seeking contracts with continuous
improvement parameters and innovative sourcing models such as a combination of
global sourcing, technology enhancements, and process improvements for optimal
service delivery and ongoing cost savings.

“Now that buyers are looking beyond a one-time savings impact from labor arbitrage and
sourcing their Finance & Accounting processes from a large, well-established pool of
suppliers, they need to ensure careful evaluation to identify the solution that is best
suited to their needs,” said Saurabh Gupta, Research Director, Everest Research
Institute. “At the same time, suppliers need to boost their onshore resource base, invest
in technological solutions and processes as well as develop expertise around key market
segments in order to remain competitive and to provide incremental value to the buyer
year on year.”

The study also recognizes key responsibilities for buyers. To identify a solution that fits
their needs in this complex and competitive market, buyers must assess niche providers,
delivery locations and global solutions. Buyers also will be responsible for co-driving
innovation initiatives, such as engagement structuring and management, throughout the
project lifecycle.

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