FAO 2010: FAO Futures

Stan Lepeak, Managing Director, EquaTerra Global Research

This is the fourth in an ongoing series of blogs presenting the findings from EquaTerra’s recently completed market study assessing North American and U.K. finance and accounting (F&A) and F&A outsourcing (FAO) market trends. EquaTerra released the results of this market study via a webcast on January 28, 2010. The blog series has so far addressed the following points:

The introduction or expansion of FAO is increasingly one of the strategies employed to enable the CFO’s agenda. FAO investments can complement, extend and, in some cases, supplant investments in shared services operations. As noted in the prior blog, FAO is one of several tools CFOs are employing to address various challenges and take advantage of the varied opportunities facing their firms. While FAO is typically viewed as a means to cut costs – and this has certainly been a key driver in the expansion of its usage over the past two years – FAO is increasingly being employed to deliver more strategic services such as analytics, planning and compliance. If deployed successfully, FAO can enable the retained F&A organization to devote more resources and focus on more strategic activities as well. Cost cutting remains key but is now a prerequisite to undertake FAO and not the only endgame goal sought.

One of the strongest pronouncements of the success of any FAO implementation is the expansion of scope and contract renewal. EquaTerra asked market study respondents about their future plans for their FAO initiatives:

  • The most common course of action cited by 49 percent of respondents is that their organizations will expand FAO scope by outsourcing additional F&A processes
  • Forty-two percent of respondents plan to expand FAO use into new business units, geographies or divisions
  • Thirty-nine percent plan to expand the use of global or offshore delivery locations and services
  • Twenty-three percent of respondents plan to maintain current FAO scope
  • Most importantly, just three percent are planning to curtail or eliminate FAO

FAO Future Plans

There are some variations in response levels based on the size and geographic location of respondent organizations:

  • Respondents from larger organizations ($20 billion+ revenue) are the most likely to expand outsourcing into other process areas (51 percent) or add additional geographies or business units (46 percent)
  • A higher percent of U.K. versus. U.S. respondents cite FAO expansion plans (58 to 39 percent in new process areas, 44 to 37 percent in new geographies and business units and 42 to 34 percent more global and offshore)

While problematic or “failed” outsourcing deals are often highlighted in the press and the market, this market study (again) illustrates that most FAO buyers are satisfied and plan to expand the scope of their efforts. This does not mean that there is not (often much) room for improvement, but that FAO is a mainstream tool for CFOs to employ to address their strategic agendas.

Next up: FAO benefits sought and achieved.

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