Outsourcing of Finance and Accounting Functions Likely to Grow, According to Study by Accenture and EIU
Executives View Outsourcing as ‘Strategic Weapon for Change’
NEW YORK; June 17, 2003 – The outsourcing of finance and accounting functions is primed for growth, with more than 70 percent of senior executives predicting that demand will become even more prevalent over the next three years, according to a study released today by Accenture and the Economist Intelligence Unit (EIU).
The study, which examined finance and accounting outsourcing, consisted of an online survey of senior executives from 236 companies representing a variety of industries across North America, South America, Europe and Asia. The survey was complemented by one-on-one interviews with senior executives at another 44 companies globally.
Approximately 30 percent of the companies that participated in the survey reported that they outsource finance and accounting functions, with two-thirds of those (65 percent) characterizing the arrangement as successful (57 percent) or very successful (8 percent). And, while cost savings and increased productivity are key motivators for outsourcing, the study determined that finance and accounting outsourcing is increasingly being used as a catalyst for business transformation.
“Cutting costs and enhancing productivity remain prime motivators, but it’s clear that some companies see outsourcing as a strategic weapon for change,” said Stewart Clements, global managing partner for Accenture Finance Solutions, which provides finance and accounting services on an outsourced basis. “Outsourcing brings an outsider’s discipline to reviewing and reshaping entire business processes, helping companies execute ambitious improvement plans.”
Indeed, commentary from respondents who participated in the one-on-one interviews with the study’s researchers supported the view that companies are increasingly leveraging outsourcing for strategic benefits. “We needed a fast turnaround, so we turned to Accenture to help us centralize several functions, including finance,” said Marco Trecroce, group business transformation and operations director, Thomas Cook UK. “Thanks to our arrangement with Accenture, which we call co-sourcing, we’ve transformed our finance function and created a shared service center and customer-oriented culture for the company.”
According to the study, the finance and accounting function most commonly outsourced is payroll, with 27 percent of the survey respondents who outsource reporting that they outsource this function. Budgeting and forecasting are the two finance and accounting functions least likely to be outsourced. Not surprisingly, the survey indicated that executives are more inclined to outsource generic finance processes than core operations.
Other key findings of the study:
- Surprisingly, 82 percent of survey respondents who said their companies outsource finance and accounting said they have no formal metrics in place to measure the success of the outsourcing arrangement. “Metrics clearly encapsulate the arrangement objectives, provide a focus for delivery and clearly measure the results,” said Clements.
- Two-thirds (66 percent) of respondents who said their companies outsource some finance and accounting functions cited lower costs as the primary benefit of outsourcing. For instance, a French specialty chemicals company reported that it reduced its finance and accounting costs by 30 percent in two years by outsourcing these functions.
- Respondents reported that the benefits of finance and accounting outsourcing transcend cost reduction, with 32 percent pointing to increased business productivity on the part of the finance team.
- More than 55 percent of those surveyed felt that finance outsourcing sharpens the focus on core competencies, a key enabler in business transformational change.
- The drawbacks of outsourcing cited most often by survey respondents were the risk of valuable data falling into competitors’ hands (52 percent), the risk that the cost of outsourcing will exceed expectations (48 percent), and the erosion of in-house knowledge (45 percent).
- While the study did not break out findings by region, it determined that the outsourcing of finance and accounting is gaining acceptance in the Asia Pacific region, where it is not yet as common as in the United States or Europe. Economic expansion, especially in China, is one reason for the anticipated growth in Asia.
The study also includes a list of what Accenture refers to as the “golden rules” of finance and accounting outsourcing, which include tips on how to address typical outsourcing issues. “This is a valuable tool that codifies the experiences of participants and can help other companies make their finance and accounting outsourcing experiences a success,” said Clements. A complete list of the rules is available in the press room on the Accenture Web site at www.accenture.com.
About the Study
Accenture, in cooperation with the Economist Intelligence Unit (EIU), conducted a wide-ranging global study aimed at helping senior executives grasp the opportunities and defuse the risks posed by finance and accounting outsourcing. Conducted during January and February, 2003, it was comprised of an online survey of senior executives from 236 companies in a wide variety of industries across North America, South America, Europe and Asia, as well as one-on-one interviews, conducted by researchers from Accenture and the EIU, with senior executives from an additional 44 companies globally. The full report is available on the Accenture web site at www.accenture.com. Its title: Outside upside: Finding focus through finance outsourcing
Accenture is the world’s leading management consulting and technology services company. Committed to delivering innovation, Accenture collaborates with its clients to help them realize their visions and create tangible value. With deep industry expertise, broad global resources and proven experience in consulting and outsourcing, Accenture can mobilize the right people, skills, alliances and technologies. With more than 75,000 people in 47 countries, the company generated net revenues of $11.6 billion for the fiscal year ended August 31, 2002. Its home page is www.accenture.com.
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