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| Thursday, July 26, 2007 | |
| F&A Outsourcing Moves to the Mid-market | |
| Ned Madden | |
| But problems lurk for those who fail to understand the terrain | |
| Madden is CEO, Real Time Global Services. [This article has been contributed by a reader of Global Services. To contribute, click on the "Write for Global Services" link at the bottom of any page.] | |
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A dovetailing of Finance & Accounting Outsourcing (FAO) and accounting software into the U.S. mid-market is occurring because of the over-crowding taking place in both the FAO and software areas in the high-end corporate sphere.
The Big Five of the accounting software market—SAP, Oracle, Microsoft, Sage and Intuit—are caught in the grip of a software industry consolidation that is barreling along, far outpacing any other U.S. industry driven by big vendors desperate for growth. With the big multinational corporate market well saturated, major software growth is going to come from the mid-range.
The same holds true for FAO growth. Under the headline, “Race to the Middle,” FAO Today Magazine sounded a warning in 2006 to all FAO competitors who want a piece of the mid-market action: “…the mid-market has arrived and any provider not contemplating FAO, the fastest-growing segment of outsourcing, should simply hang up its gloves and go home."
FAO—outsourcing corporate money management and accounting activities—continues to grow as an engine of business process outsourcing (BPO) vitality. Along with HR and procurement, FAO is considered one of the three main BPO “towers.”
And the Indian players are at the heart of the action. In a Sept. 2006 white paper from the Dallas-based Everest Research Institute, the headline “Indian Suppliers: Spicing up the FAO Industry” topped the report. “The increasing business savvy of Indian services providers to put pressure on traditional providers is changing the game,” wrote Phil Fersht, VP FAO research. According to the paper, the Indian FAO suppliers now account for nearly 30 percent of all FAO contracts signed to date. “The traditional ‘Big Four’—IBM, Accenture, ACS and Capgemini—are increasingly nervous about tackling aggressive Indian suppliers such as Genpact, Infosys and WNS than competing with each other.”
In an Everest Research Institute June 2007 FAO Market Update: “The Global FAO Supplier Landscape,” Indian companies receive recognition for playing a key role in the growth of FAO. In the report, Gurgaon-based Genpact emerges as the Indian FAO player to beat. As today’s leading India FAO supplier, Genpact is noted in the report for its plans for an IPO this year and for its recent big contracts with Hercules, Kimberly-Clark, GlaxoSmithKline, Linde AG and Wachovia.
“The (FAO) offshore value proposition is well developed and India has emerged as the global offshore hub,” the report declares, adding “with Eastern Europe gaining momentum.”
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