From Auditors to Providers: Big Four’s Journey into FAO Services | Blog

The Big Four accounting firms have been steadily expanding their service horizons, casting a wider net in the managed services market in pursuit of growth and diversification. Leveraging their deep-rooted understanding of global organizations’ financial and operational intricacies, the Big Four possess a unique vantage point that can help them cause a shift in the Finance and Accounting Outsourcing (FAO) market. With their proven track record of innovation and adaptability, coupled with the inherent synergies between their core competencies and the F&A value chain, the stage is set for the Big Four to carve out a significant stake in this competitive domain. Read on for insights into the research. Or reach out to discuss this topic further.

FAO market’s appeal for the Big Four

Despite uncertain economic conditions, the FAO market has demonstrated remarkable resilience, with robust growth in the last year (~9%) and a double-digit growth forecast (11-13%) till 2025, demonstrating sustained expansion in the coming years. This growth goes beyond the mature North American and European markets. Geographies such as Latin America (LATAM) and Asia-Pacific (APAC) and industry segments such as retail and CPG, healthcare, and travel and logistics are witnessing a recent surge in FAO demand, indicating increasing openness to leverage third-party support for F&A operations.

Though FAO is the most mature BPO segment, there is enough white space for new and incumbent players to mark their presence in the market. With an estimated total addressable market of US$80-85 billion in 2023, the penetration rate is no more than 15-17%. This suggests that many global organizations have yet to fully embrace outsourcing services for their F&A function, which signifies ample opportunities for growth and expansion for FAO service providers.

Parallelly, enterprise satisfaction levels have remained stagnant over the past two years, primarily due to perceived shortcomings in innovation, slow decision-making processes, and inadequate stakeholder management. As enterprises increasingly demand contextualized and high-end niche services, there’s an anticipated transformation in the dynamics of outsourcing relationships. This evolution underscores a growing emphasis on long-term sustainable outcomes, prompting providers to recalibrate their strategies to meet evolving client needs.

This shifting landscape sets the stage for significant disruption, with providers gearing up to offer innovative solutions that cater to enterprises’ evolving demands and expectations.

Assessing the Big Four’s dive into FAO waters

With their formidable expertise, extensive resources, and global delivery network, the Big Four possess the capabilities to seize untapped opportunities and capture the white spaces in this evolving FAO market. While their vast client network will allow them to cross-sell their F&A services to their existing consulting customer base, their trust and track record will also solidify a credible foundation in competitive RFP scenarios for FAO contracts. Such strategic advantages in favor of the Big Four ensure significant benefits for buyers, as has been detailed in the exhibit below: 

Buyer benefits from Big Four’s FAO market expansion | Source: Everest Group (2024)

Beyond tapping into new revenue streams, the Big Four’s foray into this market offers an opportunity to strengthen client relationships and mitigate risks by diversifying their services beyond traditional audit, tax, and advisory services. It also gives them an opportunity to expand their footprint globally and penetrate new geographies and industries. Leveraging the natural synergies of their existing capabilities with F&A, the Big Four can take a stronger value proposition to the clients, which would ensure a comprehensive suite of services for organizations as they focus on their core operations.

While entering the FAO market seems promising, it also demands meticulous evaluation of critical factors to ensure success, as detailed in the table below:

Key considerations for successful FAO market expansion for the Big Four | Source: Everest Group (2024)

What happens to the existing provider landscape?

Both large and small providers need to strategically adapt in the FAO market due to increased competition from the Big Four. However, there could be inherent differences in the way these two categories might experience the expansion of the Big Four in the FAO space:

  • Impact on large providers: Even while the large F&A players have the capabilities to withstand the Big Four’s expansion, they will find themselves amid a fierce competitive storm. While many of the large F&A players come either from a domain or technology heritage, the entry of the Big Four from their consulting roots will create a pull for advisory capabilities from the clientele of most of the existing large F&A providers, compelling them to ramp up their advisory capabilities. Niche services such as enterprise risk management and compliance will no longer remain as good-to-haves given the experience of the Big Four in these areas. Large providers must also be attentive to client perception since preserving long-term partnerships requires upholding trust and proving value in the face of formidable competitors
  • Impact on small providers: While the impact of the entry of the Big Four for the smaller players remains minimal, they still need to prepare to compete for market share at a larger scale than before. Both the Big Four and existing providers will look to homogenize their target segments by penetrating the booming SMB and lower mid-market segments, which have historically been the forte of these small providers. Hence, differentiation will be paramount for these small providers to stay relevant with the big players of the market. Some of the ways smaller providers can create differentiation are by providing tailored solutions in an as-a-service construct, offering flexibility in pricing and scope expansion after SoW signing, and handholding throughout the client’s transformation journey

What’s ahead?

The Big Four will bring a new set of first-generation FAO buyers with them. Progressively, a lot of them will move ahead in the maturity spectrum, exposing them to the breadth of services and providers available in the FAO market. Existing F&A players will have the chance to carve out a share from this larger market, albeit with substantial strategic adjustments. With the four biggest accounting firms jostling to create their space in the FAO services market, it will be intriguing to see how the first movers among the Big Four chart a bold course forward to secure a significant edge in the coming years.

As we continue tracking the changes in the FAO market landscape, stay tuned for the Finance and Accounting Outsourcing (FAO) PEAK Matrix® Assessment 2024 and Finance and Accounting Outsourcing (FAO) State of the Market 2024 reports for more details on the Big Four’s play in the FAO market.

Watch our webinar, Sourcing Leaders’ Key Priorities: Accelerating Growth Through Global Services, to hear our sourcing and pricing analysts discuss action items to attain an accelerated growth trajectory.

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