The Outsourcing Revolution?

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On the surface, outsourcing sounds like a great way for CPA firms to provide service, cut expenses, and either raise profits on outsourced services, such as tax preparation, or at least maintain profits. But outsourcing has the potential to transform the tax and accounting market place. It's clear that tax preparation won't be the only traditional CPA service to be outsourced. Write-up is likely to be next. Some outsourcing organizations have already added write-up to the service line-up, and other entrants are gearing up.

The idea that firms will simply send their work to countries with lower pay scales for their accounting professionals and be able to keep the savings is likely to be illusory. Things are likely to change in ways that we haven't forseen.

Some organizations are going to realize that if they can take tax and write-up services to volume, they can accept less profit and significantly lower prices for traditional services. Organizations with good marketing arms ought to be the ones that can take advantage of this potential. An outfit such as American Express Tax & Business Services comes to mind as a candidate for being able to take advantage of the cost efficiencies involved.

The CIO's View

Partner Insights

What are issues facing the people who run technology operations at CPA firms today?

You can probably guess some of the answers. But in "The CIO's' View," the people who are leading technology efforts in accounting firms tell you what is taking their time and attention.

Privacy is one of the concerns faced by anyone in business, including people sending email. You may not have privacy--at least that's the view of Scott McNealy, CEO of Sun Microsystems--but there are issues to deal with anyway. In "Private Eyes, Public Policy," Accounting Technology examines what's happening in terms of policy and technology.

And if clients are putting their information into electronic formats, are Web-based tax organizers one of the tools they are using? In "Putting the W in Tax Organizers," associate editor Carly Lombardo examines if these tools are getting much use.

Nearly everybody uses W-2s or 1099s. As tax season approaches, Accounting Technology looks at the different approaches to providing these forms in its story, "W-2s à la Carte?"

Whoever the winners may be, it's really hard to envision another outcome because at some point, the economics should dictate that the market will operate in favor of high-volume, low-cost providers. This is the way markets operate and it's hard to see why CPA firms should be exempt, especially on commodity services like basic tax preparation.

Moreover, outsourcing will likely transform how firms are structured. One New York CPA says he worries about the loss of skills. With the grunt work being shifted offshore, younger accountants, he worries, are not going to develop the basic skills they will need as they move up the career ladder. Today's partners learned the business from the bottom. Will tomorrow's partners, who won't have performed lower-level work, be able to adequately review the services provided by the outsourcers?

Perhaps this is alarmist. But new technologies and new methodologies have a way of conforming to the law of unintended consequences. Someone is going to see the potential for delivering services in a way that was not originally envisioned.

And if manufacturing jobs can be shipped overseas to produce lower-cost products, why shouldn't the same thing apply to tax and accounting jobs?

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