The F&A Outsourcing Market - The Way Forward
So we are now coming to the end of 2011 - Let’s take an in-depth look at what's driving the F&A outsourcing market.
The F&A Outsourcing market has witnessed a healthy growth trend and is being widely adopted across most industries with manufacturing, financial services, retail, travel and logistics, and energy and utilities accounting for 70-75 percent of total F&A outsourcing spending in 2010.
Demand in the emerging markets- whether it is India or Asia Pacific or Latin America- for F&A outsourcing services will grow this year.
This is primarily because the F&A outsourcing market has attained maturity with respect to conventional key markets like the USA. In fact, most of the growth for this segment in 2010 was related to contract renewals.
2012 will be the F&A outsourcing year for mid-market customers; this segment has started focusing on profitability and is looking at all possible avenues for cost reduction.
The trend of shifting from in-house to outsourced F&A services is not entirely due to the need to reduce costs. The other significant growth driver is the fact that F&A processes have become more and more complex. This is compounded by increasing globalization. Today, it’s not unusual, even for small and midsize companies, to have operations across continents. Companies that decide to outsource their F&A work are looking for significant value additions – not just a vendor to do transactions but a service provider with a high level of expertise in all functions, regulatory compliance and across global operations.
A significant number of American and European based multinationals, which currently have well entrenched F&A outsourcing processes and systems in place, for their key markets, are now entering the next phase of F&A outsourcing through the emerging markets. This is primarily because the emerging markets are creating enterprises that are growing at a rapid rate and are even expanding their scope of business outside their home territories. They are looking at F&A outsourcing more from the prospect of creating growth platforms along with delivering process excellence through use of process management expertise.
For people who have experienced their first wave of F&A outsourcing, they can be clearly seen going up the value chain. Lot of the business with existing customers that was in the initial pieces of transactional and little beyond transactional like ledger F&A outsourcing has now moved on to closing reporting, financial planning, tax support etc.
Increased demand for analytics and other high-end F&A services has forced service providers to develop industry specific analytics capabilities in order to show differentiation in this market.
This trend is the main reason why today, we see that 'second tier vendors' are aggressively contesting to gain market share and are creating differentiated offerings to distinguish themselves in the crowded F&A outsourcing market.
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Today we see aggressive strategies being adopted to move the more routine F&A activities, offshore, with only a limited emphasis on increasing onshore footprint for critical, core activities. This is intended to be a forum for leading outsourcing executives to share their experiences, views, opinions, best practices and lessons learned in the world of business process outsourcing and offshoring.
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