Upfront: F&A Outsourcing Accelerates

Finance and accounting outsourcing is picking up speed, and high-dollar deals are becoming more frequent, according to research conducted by the Dallas-based Everest Group. Worldwide, the study identified 86 F&A outsourcing agreements worth $1 million or more annually that were contracted between 1991 and October 2003. More than half of those deals were signed in 2002 and 2003.

The functions that were outsourced most commonly are accounts payable (included in 81 percent of the agreements) and accounts receivable (in 65 percent). More than 40 percent of the deals were "full service" in scope -- that is, they included all 10 of the functions the study reviewed: A/P, A/R, tax, payroll, internal audit, fixed-asset budgeting, general accounting, treasury and risk management, budgeting and forecasting, and management reporting and analysis.

"2004 will be a key year in the evolution of FAO [finance and accounting outsourcing] as buyers draw the line for what is or isn't outsourced," says Michel Janssen, president of supplier solutions with the Everest Group. "Because the fundamentals support FAO, buyers are reevaluating what is core to their businesses." He predicts that outsourcing service providers will develop industry-specific products for finance and accounting functions in various segments, including the travel, financial services and transportation industries.