Introduction

Offshoring has been a key factor in the growth of the multi-process Finance & Accounting Outsourcing (FAO) market. With multiple drivers having led to the high offshore adoption in FAO (currently over 75% of known deals have elements of offshore delivery), the offshoring value proposition in FAO is now well established, and adequate supplier options exist in the market today. In addition, global buyers are now looking to source skills from multiple regions, and a single-location offshore delivery model is giving way to a true global sourcing model for FAO. As the offshore FAO market matures, there is an increased push in the market to innovate beyond pure labor arbitrage.

In this study, we analyze key trends emerging in the offshore FAO market. The report focuses on value proposition of offshoring in FAO and key offshore adoption trends, offshore supplier and location landscape, and implications for the market as it innovates beyond labor arbitrage

Scope

The scope of analysis includes:

• Third-party F&A outsourcing contracts and not shared services or captives
• Multi-process FAO contracts with a minimum of two F&A processes, over US$1 million in Annual Contract Value (ACV), and a minimum contract term of three years
• All multi-process FAO contracts signed as of March 2007

Contents

While global sourcing has increasingly become a integral component in how FAO services are developed and delivered, no other BPO market has experienced the same level of adoption and innovation from going offshore as FAO.  Ten years into this experiment, Everest Research Institute offers these key findings:

• While labor arbitrage is a key driver for offshoring in FAO, other drivers such as improved operating model and superior quality provide business benefits that have made the offshore proposition even more compelling, and are expected to drive future growth in the F&A market
• Over 80% of the FAO workforce is located in offshore locations globally, with India as the hub for sourcing F&A services. Eastern Europe has emerged as a key growth area for F&A service delivery and has witnessed tremendous supplier activity over the last two years
• It is becoming increasingly difficult to differentiate between suppliers as a labor-arbitrage-driven offshoring model is fast becoming a commodity factor. Buyers are looking at business impact and continuous improvement through FAO beyond a one-time savings impact from labor arbitrage.