Finance and accounting outsourcing (FAO) buyers are increasingly open to third-party support for complex, judgment-intensive processes, and digital solutions; providers are further differentiating themselves with talent strategies, governance models and ESG initiatives.
Everest Group projects that the FAO market will grow significantly (up to 10% year-on-year) in 2022 because enterprises are demonstrating an openness toward expanding their scope of services with third-party service providers.
While FAO is one of the most mature Business Process Services markets, it is far from reaching saturation, and great growth opportunity still exists in the market, as evidenced by the double-digit growth rates that Everest Group is forecasting over the next few years.
Trends driving FAO
Mature buyers are becoming more open to leveraging third-party support across more complex, judgment-intensive processes [such as financial planning and analysis (FP&A) and tax] as well as industry-specific processes (such as premium collections and claims accounting in the insurance sector).
Other industries where specialized expertise in finance and accounting is highly valued include banking and financial services (BFS), media and entertainment, healthcare, retail and consumer packaged goods (CPG), and travel and logistics.
CFOs and other finance leaders are increasingly leveraging a “one-team” approach with third-party providers to centralize governance frameworks; implement environmental, social and governance (ESG) initiatives; and demonstrate success with measurable and standardized metrics.
Organisations are also becoming more open to leveraging service providers’ support in their Global Business Services (GBS)/Shared Services Centre (SSC) operations.
FAO providers prepping for growth
- Developing more flexible global services delivery and location models.
- Providers are rebalancing and “de-densifying” work across locations while enabling office, work-from-home and hybrid models.
- Building a robust talent management strategy with a well-differentiated, techno-functional talent pool.
- Creating robust, agile and secure workspaces by investing in collaborative tools and platforms.
- Investing in partnerships to cater to digital demand, especially with respect to cloud, AI (artificial intelligence) and D&A (data and analytics).
- Creating synergies and market differentiation by unifying digital assets into best-of-breed Business-Process-as-a-Service (BPaaS) platform solutions that help buyers minimize upfront capital expenditures.
“The finance and accounting outsourcing market has been resilient throughout the pandemic, continuing to grow at a rate of 9 to 11 per cent,” said Shirley Hung, partner at Everest Group.
She opined that during this time, service providers have proven themselves to be valuable partners, not just in cost control, but in far more sophisticated ways, like helping organisations respond to workforce challenges, adopt digital technologies, and develop strategies for governance, ESG, and more.
“We’re also seeing that buyers are much more confident in using service providers for complex, judgment-intensive processes. All of this suggests that the FAO market will regain its pre-pandemic momentum and grow at a healthy clip for the next few years,” she continued.
These findings are discussed in more detail in Everest Group’s recently published report, Finance and Accounting Outsourcing (FAO) State of the Market Report 2022: Growth and Opportunity in the Digital Era.
An 8-10% growth rate in FAO spending is expected from June 2021 to June 2022.
BFSI, manufacturing and retail constitute the major share of the FAO market; retail, hi-tech and telecom, and healthcare segments are key drivers of growth, despite the impact of COVID-19.
APAC has become a hotbed for F&A transformation.
While India continues to be the leading delivery location for F&A services across the globe, FTEs grew across delivery locations in Southeast Asia.
The Everest Group PEAK Matrix for FAO Services identified Accenture, Capgemini, Genpact, IBM, Infosys, Tata Consultancy Services, and Wipro as accounting for more than 65% share of the FAO market and demonstrated 10-14 % growth in 2020, which was above the market average.