High Buyer Satisfaction and Demand for Analytics and Technology Highlight State of the Global FAO Market According to Everest Group Report

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US$4.3 Billion Market Sees 10 Percent Growth and Strong Contract Renewals.

Saurabh Gupta, Vice President, Everest Group

Saurabh Gupta, Vice President, Everest Group

We’re seeing technology, global delivery and vertical industry specialization continue to bring innovation and new value to buyers in the FAO segment.

Nearly two-thirds of the annualized contract volume growth in 2012 was contributed by contract extensions and renewals of existing Finance and Accounting Outsourcing (FAO) deals, according to a new research study by Everest Group, an advisory and research firm on global services.

The high levels of buyer satisfaction supporting this trend meant that only 10 percent of the deals that came up for renewal were terminated and mostly not because of lack of performance. The FAO market continues to witness dominance by three large firms, Accenture, Genpact, and IBM. However, competition is intensifying, with market share of the top three providers declining from 68 percent in 2002 to just under 50 percent in 2012.

The report, Finance and Accounting Outsourcing (FAO) - Annual Report 2013, also highlights how demand for new technologies is rising, driven by buyers wanting to unlock additional engagement value. More than half of the contracts signed in 2012 included add-on tools and technologies, such as Business Process as a Service (BPaaS) and other cloud-enabled offerings, especially in the SMB segment. Demand for mobile F&A solutions and dashboards, as well as FP&A (financial planning and analytics) and operational analytics also is increasing.

“We’re seeing technology, global delivery and vertical industry specialization continue to bring innovation and new value to buyers in the FAO segment,” said Saurabh Gupta, vice president at Everest Group. “These dynamics are preserving a highly competitive environment, one where incumbent players are continually challenged by the agility and specialization smaller service providers.”

The global multi-process FAO market witnessed a moderate growth of 10 percent in 2012, showing signs of a mature and stable market. Beyond the desire for cost reduction, process improvement, standardization, and scalability/flexibility drove FAO adoption, emphasizing a cost-plus-value proposition.

With an increasing FAO market maturity, the approach towards F&A transformation has become more sophisticated and practical. A “world-class lift-shift-and-fix” approach is becoming prevalent where the service provider focuses on improving business outcomes vis-à-vis best-in-class benchmarks. At the same time, buyers prefer a more risk-averse “phased or incremental” approach as opposed to the “big-bang” approach.

The report analyzes the global multi-process FAO market, focusing on:

  •     Market size and buyer adoption
  •     Value proposition and client satisfaction assessment
  •     Solution characteristics across contract size, process scope, technology, industry alignment, global sourcing, pricing structures, and performance metrics
  •     FAO service provider landscape covering service providers’ market share and areas of investments    

The report is designed to help key stakeholders (buyers, service providers, and technology providers) identify trends and provides an outlook for 2013. Further, the report also provides a comprehensive coverage of the global FAO market including detailed analysis of market size and growth, buyer adoption trends, FAO value proposition, and client satisfaction, solution characteristics, and service provider landscape. Additional report findings include:

  •     Europe witnessed the maximum increase in FAO adoption. Share of mid-market and small buyer segments also increased significantly in 2012
  •     Buyers are increasingly adopting non-advisor-led competitive bidding route for sourcing F&A services
  •     Service provider performance is up-to-the-mark against the metrics important to FAO buyers, resulting in high satisfaction levels. However, buyer organizations have highlighted some areas of improvements for service providers to work upon
  •     With respect to the industry alignment, F&A services are increasingly getting industry-specific
  •     India continues to be the predominant hub of offshore delivery, providers are striving to build a balanced onshore-nearshore-offshore model
  •     70 percent of contracts in 2012 included an end-to-end scope as opposed to functional piecemeal approach

For more information about the report, Finance and Accounting Outsourcing (FAO) - Annual Report 2013, other Finance and Accounting Outsourcing reports, or other research services, please visit research.everestgrp.com, e-mail info(at)everestgrp(dot)com or call +1-214-451-3110.

Upcoming FAO Report
In June, Everest Group will publish the FAO PEAK Matrix and Service Provider Landscape report, which will classify providers into Leaders, Major Contenders, and Emerging Players based on market success and delivery capability.

About Everest Group
Everest Group is an advisor to business leaders on the next generation of global services with a worldwide reputation for helping Global 1000 firms dramatically improve their performance by optimizing their back- and middle-office business services. With a fact-based approach driving outcomes, Everest Group counsels organizations with complex challenges related to the use and delivery of global services in their pursuits to balance short-term needs with long-term goals. Through its practical consulting, original research and industry resource services, Everest Group helps clients maximize value from delivery strategies, talent and sourcing models, technologies and management approaches. Established in 1991, Everest Group serves users of global services, providers of services, country organizations and private equity firms, in six continents across all industry categories. For more information, please visit http://www.everestgrp.com and research.everestgrp.com.

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