About 36,300 Finance and Accounting (F&A) FTEs are locate in offshore destinations such as India, Eastern Europe, Latin America, China and Southeast Asia, says a recent study Global Sourcing in FAO by Everest Research Group. At present the total count of such employees stands at 44,000 (approximately). While these figures have been concluded from the sample set of 16 global service providers (Accenture, ACS, Capgemini, Cognizant, EDS, EXL, Genpact, HP, IBM, Infosys BPO, Intelenet, OPI SourceNet, TCS, Wirpo, WNS and Xansa) there are more than 20 legitimate suppliers in this segment of outsourcing.

Further geographical analysis reveals that India is the global offshore hotspot with 70 percent (25,410) of offshore F&A employees working in India. Twelve percent of offshore F&A employees work in Eastern Europe, 7 percent in Latin America, and so on. (See Pie Chart for more information on this).

Another interesting finding of the study is that more than 77% of FAO deals are based on an offshore delivery model. The most recent example of such deals is the FAO deal between Infosys BPO and Royal Philips Electronics. Infosys BPO is planning to expand its European operations by acquiring three shared-service centers located in India (Chennai), Poland (Lodz) and Thailand (Bangkok) from Philips for $29 million. (For more information on this deal see Infosys in Outsourcing + Acquisition Deal with Philips)                                                                  

The study also finds that the “FAO market has more than doubled since the beginning of 2005.” The outsourcing of financial services was started in 1990, and took a new turn when GE invested in GECIS (now Genpact) in 1997. The FAO industry is forecast to reach maturity level in the next three years, with strong growth drivers such as access to large and qualified labor pool; high offshorability of FAO processes; direct-cost savings; and business benefits beyond direct-cost savings. See Box for evolution F&A offshoring since 2005.

“In the last quarter, FAO has picked up, and is a leading demand area with a strong hold in EMEA,” says Stan Lepeak, Managing Director, Research, EquaTerra.

Today, the value proposition around offshoring in FAO is evolving in two key areas. First, providers deliver on the promise of global sourcing by actively pursuing low-cost regions other than India, with Eastern Europe being a focus area. Second, the inclusion of judgment-intensive processes, such as analytics and reporting, incorporated into the globally sourced components of FAO deals.

While labor arbitrage and productivity improvements can potentially save buyers between 30 to 40 percent on their direct costs, these are one-time benefits that typically stagnate as the deal progresses.

Box

2000–2006	2007 — At Present	2010
IBM acquires Equitant Genpact buys Creditek General Atlantic takes in Genpact Infosys acquires Citigrouo stake in Progeon and renames it to Infosys BPO Mellon acquires SourceNet WNS gets listed in NYSE Savista, Advantium and Meridian become part of Accenture Genpact wins succession of contracts, plans IPO for 2007 EXLService becomes a public company· India-centric providers begin to successfully complete with global majors	FAO market has more than doubled in the last two years Offshore value proposition is well developed India has emerged as the global offshore hub with Eastern Europe gaining momentum Standards still being refined but within bounds More than 20 legitimate suppliers exist	The industry tends to reach at maturity level in the next three years

Source: Everest Research Institute