As the infrastructure matures to enable F&A solutions that take advantage of low-cost offshore talent and robust supplier process offerings underpinned by F&A technology, the Finance and Accounting Outsourcing (FAO) market will grow by 30% in 2007, says a study by The Everest Group.

The FAO market has grown by more than 45% since the beginning of 2005 and reached two billion dollars in expenditures in the U.S. last year, according to the research — Finance & Accounting Outsourcing (FAO) Annual Report 2006.

According to the study, North America-based contracts continue to account for over half of FAO revenues, with increasingly rapid growth in Continental Europe. Among the industry verticals, manufacturing and energy and utilities are leading the FAO adoption, capturing nearly 50% of the market. Retail and financial services are the most under-penetrated sectors with high-untapped demand.

The report also finds that offshoring is now established as the key value lever in FAO with more than 80% of all contracts including an offshore component. While India has emerged as the premier offshore destination with the largest number of scaled FAO centers, Eastern European locations are also becoming an integral part of supplier strategy to support European operations.

The report suggests that the FAO industry is witnessing an increasingly level playing field. In 2006, Genpact, HP, Infosys BPO and Xansa significantly increased their market share. Accenture, IBM, ACS and Genpact currently lead the market on a capability market success matrix, but there is still an intense battle for overall market share.

The Institute also reported that despite the phenomenal growth over the past few years, the FAO market is grossly under-penetrated across all regions and verticals, and there is still substantial opportunity for growth.