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New contract TCV and renewals hit all-time highs; Service providers reporting strong sales pipelines; US$6.2 billion in contracts up for renewal over next 3 years; 5 service providers earn ‘2010 FAO Market Star Performers’ status
DALLAS, March 22, 2011 ─ The multi-process Finance and Accounting Outsourcing (FAO) market is projected to grow 15-20 percent and top US$4 billion in annual contract value (ACV) in 2011, according to the Finance & Accounting Outsourcing Annual Report 2011 published by Everest Group, an advisory and research firm on global services. In 2010, ACV grew almost 15 percent compared to about 10 percent growth during 2009, and total contract values (TCV) of new engagements reached a market-high of nearly US$5 billion, according to the study. The FAO market reached US$3.5 billion in ACV in 2010, representing about US$28.5 billion in total FAO spending.
According to the report, F&A sourcing represents a US$150-200 billion opportunity split equally across third-party service providers and captives/shared services. Current penetration of the third-party sourcing market represents only 5-10 percent of the overall potential, implying a significant value creation opportunity.
In addition to an increase in new FAO contracts last year over 2009, the market also reached an all-time high in contract extensions that, along with contract expansions, represented nearly 55 percent of ACV growth in 2010. The study predicts organic growth to continue as contracts valued US$6.2 billion or more are up for extension within the next three years.
“Last year saw a strong rebound in multi-process FAO adoption, which we expect to continue this year as buyers look to reduce costs and optimize processes,” said Saurabh Gupta, vice president, Research. “However, buyers continue to remain cautious and adopt a more phased approach rather than big-bang solutions.”
Other report findings include:
In Everest Group’s Performance/Experience/Ability/Knowledge (PEAK) matrix, leading service providers were Accenture, IBM, Genpact, Capgemini, Infosys BPO and HP. Other service providers in the analysis include TCS, Wipro, WNS, ACS-Xerox, Steria, Vengroff Williams & Associates (VWA), Outsource Partners International, Cognizant, EXL Services and Intelenet. Also included in the report are emerging providers: iGate-Patni, Minacs, HCL and KPIT Cummins Infosystems.
Everest Group also highlighted five service providers as 2010 FAO Market Star Performers: Accenture, Genpact, IBM, TCS and WNS. Last year, these service providers demonstrated the strongest movement forward across the following two dimensions:
The Star Performers designation relates to year-on-year performance for a given service provider and does not reflect on overall market leadership positions. Those identified as the 2010 Star Performers include both leading service providers and major contenders.
“Increasing competitive intensity among service providers is driving innovation,” said Gupta. “Beyond cost arbitrage, the FAO value proposition will expand this year to include best-in-class process optimization and, as contracts mature, we’ll see more demand for business and strategic impact. This also will be a testing year for platform and SaaS-based offerings.”
Everest Group’s analysis includes multi-process FAO contracts with a minimum of two F&A processes, over US$1 million in ACV and a minimum contract term of three years. The report includes 580 FAO contracts within this scope signed as of 2010.
To read an extract of the Finance & Accounting Outsourcing Annual Report 2011, purchase the report, or inquire about other research services, please visit research.everestgrp.com, email email@example.com or call +1-214-451-3110.