Companies Plan to Expand Accounting Outsourcing

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IT, accounting and finance administrative processes dominate the future outsourcing plans of major companies, according to a new survey by KPMG.

Roughly half of major enterprises intend to increase the volume of their application development and maintenance outsourcing during 2013, while about 40 percent intend to increase their finance and accounting outsourcing.

Outsourcing adoption is still in the early stages for many accounting-related business processes, however, with only 23 percent of the survey respondents indicating they are using outsourcing as the predominant model for accounts payable processes, 19 percent for purchasing and accounts receivable, and 11 percent for recruiting and staffing.

Achieving operational effectiveness when they outsource, specifically for cost reduction, greater scalability of operations and process standardization, continues to be the primary motivation behind IT and business operations outsourcing for more than three-quarters of the survey respondents.

The survey, “State of the Outsourcing Industry 2013,” released Monday, was conducted earlier this year by KPMG LLP and HfS Research. They polled more than 1,355 senior leaders from major global enterprises, outsourcing services providers, management consultant firms, sourcing advisory firms and other key industry influencers on their plans for outsourcing this year, and discovered that client expectations of outsourcing are evolving to be more value focused.

“It’s abundantly clear that the vast majority of enterprises are looking to expand strategic outsourcing relationships in the medium term as economic conditions improve,” said Cliff Justice, KPMG’s U.S. leader for shared services and outsourcing advisory, in a statement. “While many held back from radical transformation strategies during the recession, we’re now seeing real action from many enterprise operations leaders who are ratcheting up their sourcing plans—especially with their administrative business processes.”

Seventy percent of the survey respondents indicated they are outsourcing to access better talent, while 62 percent said they are outsourcing to gain access to better technology and improve their analytical capabilities. Mid-market enterprises with between $1 billion and $5 billion in annual revenue appear to be much more motivated by strategic needs than high-end enterprises with more than $5 billion in annual revenue, the survey found.

Eighty-eight percent of outsourcing customers said they are satisfied with cost-reduction and standard delivery from service providers, but indicated service providers are falling short in strategic areas, such as improving analytical capabilities, accessing talent and achieving innovation.

Business process outsourcing engagements are outperforming IT outsourcing engagements for cost reduction, effectiveness, process standardization, process transformation and analytical capabilities. Close to a third of high-end enterprises view global business services as a mission-critical framework for their future operating model.

“The study clearly shows operations executives are seeking to take more advantage of global sourcing models rather than traditional outsourcing models,” HfS Research CEO Phil Fersht said in a statement. “In addition to broadening service provider relationships, this involved enterprises evolving into global business services operating models that focus on greater control, customer alignment and  accountability over business operations.”

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Audits Financial reporting