FAO buyers are increasingly open to third-party support for complex, judgment-intensive processes and digital solutions; providers are further differentiating themselves with talent strategies, governance models and ESG initiatives.
Everest Group projects that the finance and accounting outsourcing (FAO) market will grow significantly (up to 10% year-on-year) in 2022, because enterprises are demonstrating an openness toward expanding their scope of services with third-party service providers. While FAO is one of the most mature Business Process Services markets, it is far from reaching saturation, and great growth opportunity still exists in the market, as evidenced by the double-digit growth rates that Everest Group is forecasting over the next few years.
FAO buyers are increasingly embracing the advantages third-party providers bring to the table, as reflected by these key trends:
- Mature buyers are becoming more open to leveraging third-party support across more complex, judgment-intensive processes [such as financial planning and analysis (FP&A) and tax] as well as industry-specific processes (such as premium collections and claims accounting in the insurance sector). Other industries where specialized expertise in finance and accounting is highly valued include banking and financial services (BFS), media and entertainment, healthcare, retail and consumer packaged goods (CPG), and travel and logistics.
- CFOs and other finance leaders are increasingly leveraging a “one-team” approach with third-party providers to centralize governance frameworks; implement environmental, social and governance (ESG) initiatives; and demonstrate success with measurable and standardized metrics.
- Organizations are also becoming more open to leveraging service providers’ support in their Global Business Services (GBS)/Shared Services Center (SSC) operations.
Service providers are positioning for growth by evolving in these ways:
- Developing more flexible global services delivery and location models. Providers are rebalancing and “de-densifying” work across locations while enabling office, work-from-home and hybrid models.
- Building a robust talent management strategy with a well-differentiated, techno-functional talent pool.
- Creating robust, agile and secure workspaces by investing in collaborative tools and platforms.
- Investing in partnerships to cater to digital demand, especially with respect to cloud, AI (artificial intelligence) and D&A (data and analytics).
- Creating synergies and market differentiation by unifying digital assets into best-of-breed Business-Process-as-a-Service (BPaaS) platform solutions that help buyers minimize upfront capital expenditures.
“The finance and accounting outsourcing market has been resilient throughout the pandemic, continuing to grow at a rate of 9 to 11 percent,” said Shirley Hung, partner at Everest Group. “During this time, service providers have proven themselves to be valuable partners, not just in cost control, but in far more sophisticated ways, like helping organizations respond to workforce challenges, adopt digital technologies, and develop strategies for governance, ESG, and more. We’re also seeing that buyers are much more confident in using service providers for complex, judgment-intensive processes. All of this suggests that the FAO market will regain its pre-pandemic momentum and grow at a healthy clip for the next few years.”
These findings are discussed in more detail in Everest Group’s recently published report, “Finance and Accounting Outsourcing (FAO) State of the Market Report 2022: Growth and Opportunity in the Digital Era.” This research provides comprehensive coverage of the FAO market and analyzes it across aspects including regional variations, buyer adoption trends, growth drivers and digital trends.
Other key findings:
- An 8-10% growth rate in FAO spend is expected from June 2021 to June 2022.
- BFSI, manufacturing and retail constitute the major share of the FAO market; retail, hi-tech and telecom, and healthcare segments are key drivers of growth, despite the impact of COVID-19.
- While mature markets of North America and Europe continue to dominate the FAO market, APAC, the U.K. and LATAM grew strongly in 2020; APAC has become a hotbed for F&A transformation.
- While India continues to be the leading delivery location for F&A services across the globe, FTEs grew across delivery locations in North America, Europe and Southeast Asia, with the emergence of new service delivery centers in Poland, Brazil and tier-2 cities in the U.S.
- The Everest Group PEAK Matrix® for FAO Services identifies Leaders as Accenture, Capgemini, Genpact, IBM, Infosys, Tata Consultancy Services and Wipro. These leaders hold more than 65% share of the FAO market and demonstrated 10-14 % growth in 2020, which was above market average.
About Everest Group
Everest Group is a research firm focused on strategic IT, business services, engineering services, and sourcing. Our research also covers the technologies that power those processes and functions and the related talent trends and strategies. Our clients include leading global companies, service and technology providers, and investors. Clients use our services to guide their journeys to maximize operational and financial performance, transform experiences, and realize high-impact business outcomes. Details and in-depth content are available at http://www.everestgrp.com.