Offshoring has become fundamental to Finance & Accounting Outsourcing (FAO), with every multiprocess FAO contract signed in 2004 and 2005 featuring an offshore component, according to the latest FAO Update by Everest Research Institute.

“FAO is mostly about direct cost savings, and offshore offering becoming a significant labor-arbitrage opportunity — has become a fundamental component of the FAO model,” said Joe Fernandes, Managing Research Director, Everest Research Institute. “This is the case across virtually all major geographic markets and industry segments. We’re finding that after call centers, F&A is the most offshored business process.”

According to the report, direct cost savings captured through offshoring include lower labor costs, lower costs of real estate and overheads and greater utilization of labor and infrastructure as a result of increased work hours and multishift operations. “These cost savings vary significantly by offshore location,” Fernandes added. “Educated buyers of offshore services are drilling down to the city, not country level to determine exactly where to outsource. Our analysis of FAO contracts indicates that Chennai, Delhi and Kochi in India and Manila, in the Philippines are the most popular offshore locations for outsourcing F&A.”