March 5, 2007

Technology Innovation is becoming crucial driver behind the future of Finance & Accounting Outsourcing 

Everest Research Institute study: labor arbitrage no longer a differentiator; 83% of FAO suppliers view technology as new critical component to success

DALLAS, March 5, 2007 - Findings from a new Everest Research Institute study entitled “Technology Innovation – Delivering Higher Value in Finance and Accounting Outsourcing” reveals over 70 percent of Finance and Accounting Outsourcing (FAO) suppliers and the majority of experienced FAO customers view technology as playing a key role in ensuring the future success of their FAO environments.

The doubling in size of the FAO market over the past two years historically was fueled by cost arbitrage made possible by organizations offshoring many of their administrative accounting processes. Currently, over 80% of FAO contracts involve service delivery from offshore centers, largely from India, but also increasingly from the Philippines and Central and Eastern Europe. Given that labor arbitrage is a one-shot weapon, continuous improvement cannot be guaranteed by labor arbitrage alone. Consequently the new generation of FAO engagements are moving towards process innovation and continuous improvement enabled increasingly by technology platforms and bolt-on solutions. Eighty-three per cent of all FAO suppliers in the study stated the future role of technology as critical to their FAO success, with 60% planning end-to-end solutions for both order-to-cash and procure-to-pay solutions in the next one-two years.

“Additionally, customers are rethinking the rationale for retaining the support maintenance and development of their F&A systems,” said Phil Fersht. “They are now more confident in the maturing FAO market with the increased availability of supplier-owned tools, emergence of SOA standards and exhibit an increasing willingness to
standardize on common processes and technology.”

The study reveals that 80 percent of FAO suppliers offer value and cost efficiencies through “add-on” technology tools to augment a buyer’s core F&A system. This is an emerging outsourcing trend that represents an important investment area for FAO providers and software vendors that work to facilitate end-clients in their FAO strategy.  Non-intrusive to the buyer’s core F&A system, common “add-on” tools around the periphery of the existing system’s landscape include F&A application “wrappers,” workflow engines, interfaces, document digitization tools, analytics, and user portals and dashboards.

“Management reporting and analytics, accounts receivable and accounts payable are the top three F&A processes with maximum usage and applicability of technology,” said Saurabh Gupta, Research Director at the Everest Research Institute. “Order-to-cash and procure-to-pay represent strategic development targets for over 60 percent of the suppliers, as the processes are well suited for automation.”

The study also reports that IBM, Accenture, Capgemini, Genpact, HP, and Perot BPS emerge with the strongest FAO technology capabilities, based upon an assessment utilizing a four-dimensional framework of technology strategy, ERP capability, proprietary solutions capability and FAO experience.

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