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, according to a recent study. 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% (25,410) of offshore F&A employees working in India. Twelve percent of offshore F&A employees work in Eastern Europe, 7% in Latin America, and so on.
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.
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.
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% on their direct costs, these are one-time benefits that typically stagnate as the deal progresses.
Source(s): Everest Research Group