Offshore Outsourcing a Part of Every Major FAO Deal in 2005; Chennai, Delhi, Kochi and Manila Most Popular Offshore Locations for FAO
Source: Everest Research Institute
NEW YORK and DALLAS, March 2, 2006 (PRIMEZONE) -- Offshoring has become fundamental to finance & accounting outsourcing (FAO), with every multi-process FAO contract(see note) signed in 2004 and 2005 featuring an offshore component. This and other key findings were reported by Everest Research Institute in its FAO Market Update, released today.
"Finance & accounting outsourcing is mostly about direct cost savings, and offshore -- offering a significant labor arbitrage opportunity -- has become a fundamental component of the FAO model," said Joe Fernandes, Managing Research Director at Everest Research Institute. "This is the case across virtually all major geographic markets and industry segments. We're finding that after call centers, F&A is the most offshored business process."
A graph indicating increase in India-based offshore employees is available at: http://media.primezone.com/cache/6149/file/2753.html
To meet growing demand, FAO suppliers have been steadily expanding their offshore capabilities. The graph and table above show the increasing investments that the largest FAO suppliers -- Accenture, Computer Sciences Corporation (CSC), Electronic Data Systems (EDS) and IBM Global Services have made in the past three years.
According to the report, direct cost savings captured through offshoring include lower labor costs, lower costs of real estate and overheads, and greater utilization of labor and infrastructure as a result of increased work hours and multi-shift operations. "These cost savings vary significantly by offshore location," Fernandes added. "Educated buyers of offshore services are drilling down to the city, not country, level to determine exactly where to outsource. Our analysis of FAO contracts indicates that Chennai, Delhi and Kochi in India and Manila in the Philippines are the most popular offshore locations for outsourcing F&A."
Editor's Note: Multi-process FAO contracts are defined as involving two or more processes, a minimum of three years in contract length and at least $1 million in annual contract value. FAO contracts that do not meet these minimum requirements tend to have marginal impact on the changing market landscape, and are therefore not included in Everest Research Institute's market analysis.
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