At Everest Group, we researched the potential effect of robotics and automation on the F&A services space. The outcome is almost as grim as the Grimm’s Fairy Tale of a fictional wolf huffing and blowing down the three little pigs’ houses. Where companies implement robotics into finance and accounting functions, we see a reduction of 25-40 percent of the FTEs by the time the implementation is complete.
Like the big bad wolf blowing down the first pig’s straw house then moving to the next pig’s wood house, automation and its impact will come in waves. The first wave, as providers move away from an FTE-based model to a transaction-based model, will result in 25-40 percent FTE reduction, with the next two waves in increments of 10-15 percent each. Making the situation for providers even worse, clients will expect their providers to share the cost benefits of automation with clients, which will cause further revenue compression. For service providers, the shift to robotics and automation is a horror story right out of Grimm’s Fairy Tales.
But in the children’s tale, the third pig built a house of brick that the wolf couldn’t blow down. The good news is there is time for providers to build brick houses.
Here’s the blueprint for building a service provider brick house: Build a transaction-based model rather than an FTE-based model and use the savings from that to expand into new areas. This will create a growth engine that can offset the revenue decline in the shift from FTEs to automation.
It’s clear at this point in time that existing F&A clients aren’t lining up to drive automation schedules … but they will over time. The big bad wolf is coming, but providers have time to build a brick house, and they can use their existing client foundation to do that.
Just don’t wait and get caught in a straw house when the big bad wolf arrives.
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