Economic Turmoil Fuels F&A Outsourcing Resurgence

By Dan Berthiaume

The outsourcing of finance and accounting business processes is undergoing a “resurgence” fueled by several global economic and business trends, according to top executives from Capgemini and financial services provider Vengroff, Williams & Associates (VWA). Capgemini recently purchased the order-to-cash business of VWA, and both companies see the merger as a sign of where finance and accounting outsourcing is headed.

“We are seeing clients getting more mature with their (finance and accounting) outsourcing and getting away from the traditional vendor/client relationship toward a trusted business partner relationship,” said Jon Bell, Vice President and CTO of Capgemini BPO. “They want a partner in the transformation of the business.”

Bell said that BPO represented 20% of Capgemini’s third quarter growth, with 60-65% of that coming from finance and accounting outsourcing. “It’s a growth opportunity to move into new areas of scope,” said Bell, who added Capgemini is working with brand new clients on more basic business problems as well as with established clients on more mature and transformative projects.

It’s the Economy

To paraphrase a famous dictate of the 1992 Bill Clinton presidential campaign, Bell and Williams agree that when it comes to the resurgence of finance and accounting outsourcing, smart people know the economy is a pivotal factor.

“In the present economy, everyone is focused on their core business, and we have the expertise to take care of finance and accounting,” said Bell.

“Companies need to optimize their working capital and drive costs down, which is leading to the resurgence of finance and accounting outsourcing,” agreed Bob Williams, chairman/CEO of VWA.

F&A Moves Forward

While the global economy is hardly in ideal shape, Bell and Williams both indicated that improvements since the nadir of late 2008 and early 2009 are now leading many companies to re-examine their finance and accounting outsourcing programs. “The economic meltdown of 2008-09 took everyone by surprise,” Williams said. “By the end of 2010 and early 2011, there was a pent-up demand for previously held back transformative initiatives. We are now looking toward producing business outcomes, with risk-based pricing models as opposed to fixed pricing models.”

OTC, Value-Adds Hold Potential

Order-to-cash (OTC) is one area of finance and accounting outsourcing with a future that looks particularly encouraging, according to Bell. “OTC has huge growth potential in the next few years,” said Bell. “It was a great fit we achieved with the VWA acquisition. There is also a lot of interest in value-added outcomes and business insight, including compliance/control and governance.”

Williams also commented on the increased client focus on value-added BPO outcomes. “BPO had been focused on basic transactional changes for last couple of years,” he said. “It’s evolving to a partnership delivering better value for clients; driving outcomes, optimizing working capital, and increasing revenues.”

Williams said finance and accounting outsourcing clients are also increasingly looking at processes such as risk mitigation credit limits and making sure customers pay within contract terms. “You need to stop revenue leakage and make sure that if customers take deductions, they take them properly.”

Bell added that working on the capital side is important to a BPO provider looking into how they can help clients grow their credit management services and fuel growth. “You want to provide a well-controlled environment where clients can extend credit and increase business with customers,” he said. “It’s about providing insight, analytics, and better (financial) controls enabling better decisions.”