Early Finance and Accounting Outsourcing (FAO) engagements focused primarily on removing Finance and Accounting (F&A) transactional processes from a customer’s organization to capture the cost benefits of offshore services from the outset. Providers did not bundle technology solutions in these contracts since the focus was on basic F&A workflows and some industry and region specific tools enabling the provider to manage the services.
Today, customers want to achieve top-line growth and efficiencies. Smart CXOs are now focusing on optimizing the quality and velocity of their dollar flow-cycle by engaging FAO providers that have the capability to deploy technology solutions that underpin, orchestrate and knit together their accounting processes. They are looking to integrate multiple accounting processes under a single provider.
The industry is now in a rapid growth cycle, and we expect a 30% increase in multiprocess FAO contracts this year (See Chart 1). Contrary to the first two phases of growth (as shown in the chart), technology transformation will be the enabler of achieving value in an FAO relationship in the third phase. Thus, organizations considering FAO options must focus on technology when evaluating their sourcing options.
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Impact of Technology Transformation
While the industry remains years away from providers being able to deploy genuine one-to-many FAO offerings, providers are developing pockets of utility across several industry-specific accounting processes (for example, procure-to-pay processes specific to hospitals). Technology wrapper-applications and providers of workflow tools are proving to be a major differentiator in the market and a huge benefit to new FAO customers.
Chart 2 shows that technology tools and solutions have a direct impact on business performance and F&A strategy. It demonstrates how the various technology tools and solutions are crucial in optimizing productivity improvements. As the blue and green bubbles indicate, the technology requirements necessary to enable FAO to add business value beyond mere cost reduction becomes significantly more complex as customers add higher business-impact F&A functions to the outsourcing mix. Impacting business value beyond direct- cost reduction, through improved SarbOx compliance, for example, will likely require Order-to-Cash (O2C) engines and workflow and document management technology tools that enable more streamlined integration of data. This will provide management quicker access to financial data to support decision-making and corporate strategy.
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