Role of Technology in F&A Outsourcing
The role of technology has become critical primarily because of the increased momentum to move work offshore. 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. Almost 90% of BPO growth has accrued from offshore engagements. This has been the predominant trend over the last decade.
This trend has resulted in quantum changes in the role of technology in F&A outsourcing business models. One of the most significant developments is the impact of new technologies and web-based services, and the innovative new business models that have emerged as a result of these developments. Business analytics is the other key area which is witnessing amazing developments as a result of this infusion of new technologies and web-based services. In fact, the role of the burgeoning field of business analytics has attained great significance. Today, we see it as a key area of growth among the critical finance functions of the future.
Technology will certainly play a significant role in the future of F&A Outsourcing, by literally ‘taking over’ the more mundane, operational activities. This will ensure that both the customers and service providers will be able to focus on the more strategic activities. We may well see some of the more strategic finance processes, such as planning and forecasting, getting fully integrated with the more traditional finance outsourcing services. Buyers will focus on outsourcing contracts that offer higher quality outcomes that are necessary to support effective decision-making. Technology is poised to change the face of F&A Outsourcing by reduced costs, improved efficiency, and enabling enterprise-wide transformation.
The role of technology in F&A Outsourcing has evolved from the basic “tie-and-run” model to an “augmentation” model. In 2010, technology augmentation emerged as the new “normal” – nearly 50 percent of the new contracts included add-on tools such as workflows, interfaces, document scanning, recognition and management, business process management, business intelligence and user portals/dashboards.
Today, many vendors are able to fully comprehend the importance of service performance and dashboard reporting, so they are now focusing on promoting web-based dashboard tools to help clients transition from a basic F&A Shared Services model to a more holistic F&A governance model. Many F&A service providers are continuing to increase technology functionality along the major business processes (Record to Report, Order to Cash and Source to Pay). These tools are web-based add-ons that can be integrated with the client ERP and/or routine data files can be pushed back and forth.
One of the biggest technology enhancements F&A outsourcing providers bring to the table - and which most in-house F&A departments lack - is performance reporting. The need for outsourcing firms to report their service levels to clients, has led them to track more metrics than any internal corporate accounting department in order to enable them to detect flaws in the process before they turn into a service level penalty. Engaging an outsourcing provider will greatly increase an F&A department’s ability to make informed decisions based on key performance indicators and provide visibility to their internal clients about the level of service being supplied.
More than over half of today’s buyers are now completely revamping their existing finance IT systems with their greatly enhanced F&A Outsourcing programs. While IT-enablement of F&A process is an increasingly important capability for providers, the industry still has some way to go before F&A processes and be delivered in cloud enabled models. F&A processes are often the toughest to move into the cloud, and only the small-to-medium business sector is likely going to enjoy any modicum of success of moving core processes such as finance and HR, into the cloud in the near-term. Market analysts believe that cloud-enablement of F&A BPO for large enterprises will develop at a much slower pace than small to medium organizations.
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