F&A BPO Services Likely to Increase for Companies in 2013

F&A BPO Services Likely to Increase for Companies in 2013

Posted by Terri Eyden on Jul 10 2013

Forty percent of major enterprises intend to increase finance and accounting business process outsourcing (F&A BPO) services in 2013, while nearly five out of ten (48 percent) companies plan to start or increase the volume of application development and maintenance outsourcing this year, according to a new survey by Big Four firm KPMG LLP and HfS Research.

The survey, State of the Outsourcing Industry 2013, which was released on July 8, found that client expectations of outsourcing are evolving to be more value-focused, with IT and F&A BPO dominating future outsourcing plans.

More than three-quarters of survey respondents say the primary motivation behind IT and business operations outsourcing continues to be effectiveness, specifically for cost reduction (87 percent); greater stability of operations (82 percent); and process standardization (74 percent).

Outsourcing adoption for F&A BPO is still a relatively new trend for enterprises, as only 23 percent use outsourcing as the predominant model for accounts payable processes, 19 percent for purchasing and accounts receivables, 17 percent for general accounting, and 11 percent for recruiting and staffing. 

Plans to Increase F&A BPO Outsourcing

Following are the percentage of industries that plan to increase F&A BPO services in 2013, according to the survey:

• Software, high-tech, and telecommunication – 45 percent
• Consumer packaged goods – 43 percent
• Manufacturing – 40 percent
• Transportation and logistics – 35 percent
• Pharmaceutical and life sciences – 35 percent
• Insurance – 33 percent
• Entertainment – 31 percent
• Banking – 29 percent
• Other industries – 25 percent
• Energy & utilities – 25 percent
• Retail – 22 percent
• Public sector – 16 percent

"It's abundantly clear that the vast majority of enterprises are looking to expand strategic outsourcing relationships in the medium term as economic conditions improve," Cliff Justice, lead partner for KPMG's Shared Services and Advisory Group, said. "While many held back from radical transformation strategies during the recession, we're now seeing real action from many enterprise operations leaders who are ratcheting up their sourcing plans – especially with their administrative business processes."

Additional findings from the survey include:

• Core areas of strategic focus when outsourcing include accessing better talent (70 percent); gaining access to better technology (62 percent); and improving analytical capabilities (62 percent).
• Mid-market enterprises ($1 billion to $5 billion in revenues) are much more motivated by strategic needs than high-end enterprises (more than $5 billion in revenues).
• Outsourcing customers (88 percent) are satisfied with cost reduction and standard delivery from service providers, but they indicate service providers are falling short in strategic areas, such as improving analytical capabilities, accessing talent, and achieving innovation.
• BPO engagements are notably outperforming IT outsourcing engagements for cost reduction and effectiveness as well as process standardization, process transformation, and improving analytical capabilities.
• Close to one-third of high-end enterprises view global business services as a mission-critical framework for their future operating model.

"The study clearly shows operations executives are seeking to take more advantage of global sourcing models rather than traditional outsourcing models," HfS Research CEO Phil Fersht said. "In addition to broadening service provider relationships, this involved enterprises evolving into global business services operating models that focus on greater control, customer alignment, and accountability over business operations."

About the survey:

The State of the Outsourcing Industry 2013 survey was conducted by KPMG LLP and HfS Research from December 2012 to February 2013. Respondents included 1,355 senior leaders from major global enterprises, outsourcing services providers, management consultant firms, sourcing advisory firms, and other key industry influencers. The aim of the survey was to understand their views, observations, and intentions for 2013 and beyond when it comes to IT and BPO.