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Date Posted: 05/03/2006
2006 Financial & Accounting Outsourcing/Off-shoring Trends Survey
Rob Rogers, Vice President
The Accounts Payable Network (http://www.theaccountspayablenetwork.com)
In the era of globalization many companies have undertaken outsourcing and off-shoring as part of their business strategies. Outsourcing and off-shoring of call centers and information technology have led the way. More recently, however, outsourcing of finance & accounting functions has been growing rapidly, according to Paul Nowacki and Nikhil Rajpal of Everest Group. The researchers expect 2006 to be a breakout year for F&A outsourcing. And while the primary motivation has been cost reduction, or as David Hay of Hewlett Packard notes, “Do my mess for less,” companies are now looking for more than just cost savings. Hay notes companies expect a progression from the “mess” to automation and better processes.
The Accounts Payable Network has conducted a survey to obtain a current picture of outsource and off-shoring practices corporately and within accounts payable departments. The general media’s broad use of the term “outsourcing” obscures two distinct but sometimes overlapping strategies – outsourcing and off-shoring. For this survey, outsourcing was specifically defined as work done by a third party, whether within or outside of the survey participant's country. Off-shoring was defined as work done in a country different from the participant's, either by a unit within the participant's organization or by a third party.
The 107 companies participating in the study break out as follows:
• NAICS Profile of Participants
Sector / Percent of Participants
Manufacturing 21%
Finance & Insurance 18%
Professional Scientific & Technical Services 10%
Other Services (except Public Administration) 10%
Information 7%
Health Care & Social Assistance 7%
Retail Trade 6%
Utilities 4%
Wholesale Trade 3%
Transportation & Warehousing 3%
All others 11%
• Annual Revenue Profile of Participants
1st quartile = $20 million
Median = $300 million
3rd quartile = $3 billion
The content of the Outsource and Off-shore Practices Survey Contents begins with general data on outsource and off-shore practice, and the percentage of organizations employing shared service centers.
This is followed by a section focused on outsourcing of functions that typically fall within accounts payable operations, including the primary objective in outsourcing AP functions, satisfaction with outsourcing AP functions and plans to outsource AP functions in the next two years.
Then the survey looks at corporate level outsourcing & off-shoring, including the what kinds of functions are outsourced and off-shored, the primary objective in corporate level outsourcing, satisfaction with outsourcing, plans to outsource corporate functions in the next two years, primary objective of off-shoring, satisfaction with off-shoring, location (country) of off-shored operations and offshoring plans in the next two years.
Summary Study Observations
• Nearly two-thirds of respondents outsource some function
• One-third of survey participants off-shore some function.
• Half of the organizations represented have a shared services center.
• Payables is the most common responsibility handled by the shared services
centers, followed by payroll and then information technology (IT).
Accounts Payable Outsource Practices
• Within accounts payable, audit recovery is the most commonly outsourced
function, followed by invoice scanning.
• Cost reduction is the most common primary objective for outsourcing payables
among organizations that outsource.
• Three-fourths of payables departments that outsource some function(s) say they
are satisfied or very satisfied; only two percent are not satisfied.
• Invoice scanning leads the list of functions that are likely to be outsourced by
accounts payable in the next two years, followed by data entry, respondents say.
Organization-wide Practices - Outsourcing
• Sixty-four percent of survey participants outsource.
• Payroll is the most commonly outsourced function of respondent organizations,
followed by IT.
• Operating cost reduction and control is the leading primary objective in
outsourcing, say 56 percent of responding organizations that outsource.
• Nearly 60 percent of organizations that outsource are satisfied or very satisfied
with it, and another 35 percent are at least "somewhat satisfied;" six percent are
not satisfied.
Organization-wide Practices - Off-shoring
• Thirty-seven percent of survey participants off-shore.
• IT is the most commonly off-shored function among respondents (49 percent of
organizations that off-shore), followed by accounts payable (39 percent).
• Operating cost reduction and control is the leading primary objective in offshoring,
accounting for 62 percent among responding organizations that off-shore.
• Nearly half of organizations off-shoring are satisfied or very satisfied with offshoring,
with another 41 percent somewhat satisfied; 10 percent are not satisfied.
• India is by far the leading location of off-shored work, by a factor of ten. It is very
distantly followed by Costa Rica, the Philippines and Australia.
• One-third of organizations expect to increase off-shoring in the next two years.
• Accounts Payable is the leading candidate for off-shoring in the next two years,
identified by 20 percent of respondents expecting to off-shore additional work;
next is IT at 19 percent.
The overlap of outsourcing and off-shoring is as follows:
• 28 percent of respondents outsource onshore, while 34 percent outsource offshore.
• 3.7 percent of all respondents off-shore but within their own organization.
• 31 percent of respondents neither outsource nor off-shore.
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