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Top Five Trends in Offshoring

Moving beyond the mere outsourcing of transaction processing, some companies are actually offshoring investigations of accounting errors.

In finance and accounting — and beyond — offshoring is following in the footsteps of the increasing globalization of company functions. But as the practice of shifting internal work to third-party providers in differing locales expands into new functions and new regions, the need for ongoing management of offshored processes is also on the upswing.

Those are the broad views of Arjun Sethi, a partner and offshoring and outsourcing practice leader for North America at the consulting firm A.T. Kearney and Christine Ahn, partner and sales, general, and administrative transformation leader at the same firm. The March issue of CFO will feature an exclusive survey on offshoring practices and trends and a complete analysis of where offshoring stands today. Here’s an early look at five key trends in the field as envisioned by Sethi and Ahn:

• Companies are offshoring finance and accounting functions that are further up the value chain. Moving beyond the offshoring of transaction processing into outsourcing such value-added areas as financial planning and analysis, some companies are actually delegating the investigations of accounting errors to outsourced providers. On the reporting side, to be sure, the controller function isn’t being outsourced. But over the last 12 to 24 months, much of the preparatory work that’s done on financial reports before it hits the controller’s desk is being outsourced, as is much of the standard reporting.

• Geographies are changing as the space matures.Offshoring of finance and accounting work in the United States is moving beyond India and other well-known spots. There’s new interest in Latin America, for example, specifically in Mexico, Brazil, and Argentina. Those destinations are seeing an inflow of invoice processing, travel-and- entertainment expense processing, and accounts-receivable work. A year ago, that would have been unlikely. Now, a number of leading suppliers are setting up operations in Latin America.

• Use of collaborative tools is burgeoning. Aiding the new collaboration in automation and technology: the use of Lotus Notes, Web chatting, and virtual-whiteboard interaction between client organizations and suppliers. With such remote networking techniques now coming into play, there’s a movement away from manual and travel-intensive processes,.

• The number of outsourcing players and the portfolio of outsourcing services is growing.. Many vendors are positioning themselves as one-stop shops, but distinctions still exist. How to bundle processes and functions, whether to bundle, and how to negotiate such deals are new issues because of the dynamism in the market.

• Finance executives are learning a painful lesson: You can’t eliminate a function or process completely. They’ve learned that companies must retain some part of the function within their own company to provide supplier management, process management, and governance. Striking a balance between the outsourcer and the company has become a challenge. While companies don’t want to build up their infrastructures again, how much do they need to hang on to internally to ensure quality, service, and cost?

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