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.

For more information about our services please contact:

Hanno de Vriend

BPO Director

H.deVriend@amicorp.com

Fernando Cancino

BPO Sales Executive

F.Cancino@amicorp.com

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.

For more information about our services please contact:

Hanno de Vriend

BPO Director

H.deVriend@amicorp.com

Fernando Cancino

BPO Sales Executive

F.Cancino@amicorp.com

F&A Outsourcing Market - An Impressive 15-20% growth expected in 2011

The Finance and Accounting Outsourcing Annual Report 2011, published by the Everest Group, offers valuable insights into the ever evolving organizational needs and how companies tend to outsource their F&A requirements.

In the year 2010, the Global Outsourcing market was valued at USD 40 billion. The global outsourcing market has sustained a steady growth in 2010 with an annualized growth rate of 6 percent.

In 2010, the outsourcing market saw Business Process Outsourcing (BPO) transactions grow by an impressive 12 percent. This healthy recovery trend was led by traditional industry verticals, such as BFSI (banking, financial services and insurance), and traditional geo-specific markets, such as North America.

Asia continued to lead offshore activity, offshore adoption also spread to other locations. Last year saw 39 new delivery centers in India followed by 32 in Eastern Europe, 27 in Latin America, 25 in the Philippines, 16 in China and six in Africa.

The Reports highlights the fact that the Finance and Accounting Outsourcing market is expected to grow 15-20 percent and top $4B in annual contract value in 2011.

Their analysis includes comprehensive coverage of 580 multi-process FAO contracts with a minimum of two F&A processes, over $1M in annualized contract value (ACV), and a minimum contract term of 3 years.

FAO market growth continues to see strong adoption across most industries with manufacturing, financial services, retail, travel and logistics, and energy and utilities accounting for 70-75 percent of total FAO spending in 2010.

Second tier vendors are aggressively contesting to gain market share and are creating differentiated offerings to distinguish themselves in the crowded FAO market.

Today, we are also witnessing strategic alliances between pure-play FAO service providers and technology providers to offer platform/SaaS-based offerings.

Outsourcing of accounts payable, accounts receivable and general ledger continue to be the most outsourced processes whereas outsourcing of financial planning and analysis is an emerging trend. ( Everest report)

In addition to an increase in new FAO contracts last year over 2009, the market also reached an all-time high in contract extensions that along with contract expansions represented nearly 55 percent of ACV growth in 2010. The study predicts organic growth to continue as contracts valued $6.2B or more are up for extension within the next three years.

An end-to-end process-driven approach to FAO is also emerging as opposed to a traditional functional and piecemeal approach. More than 50 percent of the new contracts in 2010 had end-to-end scope (Procure-to-Pay, Order-to-Cash, Record-to-Report).( Everest report).

For more information about our services please contact:

Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com

Trust Operations Outsourcing – A Progressive Tactic in Your Strategic Arsenal

Trust operations outsourcing is a very effective tactical strategy to provide relief and cost savings from your company’s back office Trust operations. You retain control of the customer relationship and on-site Trust professionals. The vendor will in turn handle all of the back-office operations and compliance.

Trust operations outsourcing removes much of the operational responsibilities from the individual bank or trust company, and places them with an experienced operations outsourcing firm. The operations outsourcer has several key advantages, which include:

• Scale in handling a greater number of transactions and assets at a lower marginal cost.

• Experienced trust operations personnel and management.

• Better ability to recruit and train operations personnel.

• More experienced IT support for the trust system.

A dynamic and quickly shifting environment calls for flexibility in a provider. This is especially important given the longevity of typical outsourcing contracts (often ranging from three to seven years). While critical, agility is only one of the key criteria by which to gauge potential provider candidates. Trust firms should also look for flexible and scalable servicing platforms, proven servicing relationships built entirely around clients’ operational needs, long-term financial strength and a history of compliance integrity. Thus, finding the right match is a matter of careful self-assessment: A firm must understand its core value proposition and how it expects to benefit from outsourcing before it goes through the vetting process of choosing a provider.

While every company’s needs are different, the process of Trust outsourcing has many common elements. The functions typically include...

• Client level (the Bank / Trust department) – Supporting services for Internal Administration, Management Reporting and Time Registration

• Customer level (the clients of the Bank / Trust department) – Supporting services for Compliance, Government Filing, Accounting & Tax, Legal Services and Invoicing & Collection

The benefits of such an initiative are considerable. Recent studies have clearly shown that, depending on the size of the department and complexity of the services provided, it is not unusual to reduce the core costs of providing Trust and related Wealth Management services by 50% or more, by strategically outsourcing Trust Administration and operations.

In addition to the significant overhead reduction, outsourcing Trust Administration and Operations offers Trust department managers an opportunity to examine business practices and methods that could simultaneously reveal significant revenue enhancement opportunities.

For more information about our services please contact:
Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com

Finance & Accounting Outsourcing (FAO) - A CEO Perspective

In a rapidly evolving competitive environment, the primary challenge that CEO's face today is increasing costs and increasing complexity. We found that many top CEO's believe they gain major competitive advantages from outsourcing. They identified functions like logistics, manufacturing, customer support and service, research & development, and human resource management.

Of greater relevance to this topic is that we found CEO's placing great emphasis on the growing importance of Finance & Accounting Outsourcing, as a way to mitigate complexity, reduce transaction costs and gain competitive advantages.

However, it is imperative that every CEO gets his F&A team to do a thorough situation analysis and a detailed evaluation, before taking the decision to outsource.

The first thing that should be initiated is the development of a comprehensive business case. An ideal business case should cover the following aspects...

- Provide a background and context to the proposal

- Communicate business needs and the available alternative solutions, together with their costs & benefits

- Estimate the costs, benefits & related financial metrics of the proposed solution

- Provide a baseline for cost management during development and future benefit tracking

- Develop a compelling case for change that will secure the required executive support

- Establish the key success criteria

- Secure approval to move forward with the program

- Obtain support from key stake holders

This process clearly this highlights the importance of understanding and interpreting the corporate agenda when putting together the F&A sourcing strategy to support it. The above may be a time-consuming and tedious task, but will be infinitely rewarding.

Driving corporate cost cutting initiatives, but in sync with the broad strategy is perhaps the greatest challenge that every CEO faces today. While cost reduction is perhaps the most voiced issue, in many situations, it need not be greatest 'need of the hour'. Which is why, one must always be vigilant about overemphasizing on cost cutting to the detriment of other strategic needs.

Today, the operational complexities that every CEO faces are formidable. They often are faced with varied goals and objectives, which sometimes may be in conflict with each other.

Driving cost cutting efforts – and cutting F&A costs along the way – while simultaneously supporting corporate strategic agendas that include goals, such as growing the business and competing against new competition, can easily lead to establishment of agenda items that are at cross purposes. The challenge is to do more with less. It is also to continue to drive new ways and means to conduct the business of F&A.

There are a variety of tools at CEOs’ disposal to affect change. Some are internally focused, such as process improvement and reengineering efforts, or quality initiatives such as Six Sigma. Investing more in new, and ideally better, IT software applications and systems is a perennial favorite but one that has fallen from favor not only due to tight economic times but also because many F&A organizations have already made extensive IT investments. Relatively new and more dramatic tactics involve the expansion of shared services centers (SSCs) or the increased use of FAO.

F&A organizations have been implementing both captive SSCs and FAO for a number of years. What has changed over the past five-10 years is the scale and scope of SSC and FAO efforts – and their usage to support more strategic F&A activities.

For more information about our services please contact:

Hanno de Vriend
BPO Director
H.deVriend@amicorp.com

Fernando Cancino
BPO Sales Executive
F.Cancino@amicorp.com