Wednesday, January 17, 2007

Everest Research Institute Study Predicts 30% Finance & Accounting Outsourcing Growth in 2007
Finance & Accounting Outsourcing Market Surpasses $2 Billion in Expenditure in 2006 with 45% Annual Growth

The global Finance and Accounting Outsourcing (FAO) market is predicted to grow in excess of 30 percent in 2007 as the global 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, according to a new report released today by the Everest Research Institute.

The global FAO market has grown by more than 45 percent since the beginning of 2005 and reached $2 billion in expenditures in the United States last year, according to the Institute’s Finance & Accounting Outsourcing (FAO) Annual Report 2006. The study reports 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 percent of the market. Retail and financial services are the most under-penetrated sectors with high untapped demand.


“Our analysis reveals that the number of multi-process FAO contracts signed doubled between 2004 and 2006,”
said Phil Fersht, vice president, BPO Research Group at the Everest Research Institute.
“We expect that existing buyer success stories, suppliers’ investments in further developing F&A process capabilities and a global footprint will drive growth in the near future.”
The FAO annual report for 2006 activity examines the global FAO market and provides insights, detailed analyses and implications for stakeholders along three key dimensions:
(1) market size and buyer adoption,
(2) transaction characteristics and value proposition and
(3) supplier landscape.

The report found that offshoring is now established as the key value lever in FAO with more than 80 percent 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.

Regarding supplier activity, 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 leading suppliers are looking to expand their global delivery capabilities through the acquisition of both captives and existing shared-service centers,”
said Fersht.
“Moreover, we expect further acquisitions of smaller FAO suppliers from the global leaders, and increased partnering with niche suppliers to fill out capability gaps. Several leading FAO suppliers are also looking to broaden their offerings with increased bundling across ITO and procurement services.”

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.
“The market is now experiencing an aggressive growth phase fueled by cost reduction from offshoring and the adoption of multiple accounting processes integrated within a single outsourcing provider,”
said Saurabh Gupta, senior analyst, and co-author of the report.
“Innovation in F&A is taking center stage as FAO is creating incremental value for new and existing buyers by creating both a business and strategic impact, supported by a streamlined, low-cost sourcing infrastructure.”

For additional information and samples from the report, please visit www.outsourcing-center.com and select the link, FAO Annual Report 2006.

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