Stan Lepeak, Global Research Director, KPMG LLP and Ron Walker, Principal, KPMG LLP; featuring Phil Fersht
KPMG and Horses for Sources (HfS) recently conducted a broad industry study, and spoke with 1355 stakeholders who buy, sell, and advise on sourcing services. Of that, we interviewed 170 customers of F&A BPO at length. Here is the first of what we found.
The market is growing
In a nutshell, outsourcing in the F&A market is $25 billion, and the biggest piece is order-to-cash, which is growing 5 percent. Multi-process F&A BPO, where two or more core financial processes are under a single contract, is $4.5 billion and growing at 13 percent.
Interestingly, Latin America is the fastest growing region with a 12 percent CAGR in F&A BPO; then Asia Pacific, with growth of around 10 percent. EMEA is growing at 8 percent, followed by North America at about 6 percent.
The fastest growing industry area for F&A BPO is the high-tech-software-telecom space growing at an 11 percent clip. This is probably not too surprising, as many of these companies are looking for more radical, fast-moving ways to build mature business models. Media and publishing is also growing at 11 percent, while the public sector is picking up at around 9 percent.
There is plenty of room for more
But in even the most commoditized processes such as payroll, 40 percent of companies still run their payroll in-house. About 50 percent still run their own AP and AR. Higher-value processes such as analytics and financial planning are still scattered inside, with four out of five enterprises not having moved them to shared services yet.
Accelerating from the start
An interesting trend is that once companies make the move to F&A BPO, even in a very small sense, it becomes much easier to see the inherent opportunities and expand. New tools, different ERPs, and cloud make it easy to implement new functions. Service providers have become much smarter and more capable of delivering point solutions easily and effectively, and buyers and suppliers are working together to explore the possibilities.
The mid-market potential
There are not very many all-in finance and accounting deals out there. They are very big and very comprehensive. Most of them are three to five years, and for one function or a couple of functions versus the whole thing. We believe we’ll see that trend continue over the next several years, with the exception maybe of the mid-market. The mid- market is where new technologies and solutions can have the most impact.
Going vertical
The other big thing that we’ve seen is that successful service providers have focused their energies on industry verticalization. They are focusing on verticals that they have expertise in and because the market is much more sophisticated than it ever has been regarding how they buy these services.
We see F&A outsourcing for many of the larger enterprises now as part of a broader initiative to leverage relationships with service providers to plug gaps, to give more flexibility to their capabilities, to add new technology and analytics, and to create new dynamics and more innovative ways to get things done.
Coming up
In another blog, we’ll discuss what companies are looking for now, and how innovation and analytics are becoming as much a part of the mix as cost savings and labor arbitrage were a decade ago.
Hear Stan, Ron, and Phil discuss the key findings of the KPMG/HfS outsourcing study in the KPMG Advisory Institute podcast: Finance and Accounting Outsourcing Market Landscape 2013.
And explore KPMG’s Shared Services and Outsourcing Institute for our latest thought leadership.
