Outsourcing Not as Popular for Financial Processes

April 18, 2006 (PLANSPONSOR.com) - A study from The Hackett Group found that companies outsource only 4% of financial processes.

By contrast, companies surveyed turn to onshore or offshore shared service centers for 65% of their financial functions, according to a news release on the study.   Responding companies said they expected their use of outsourcing to more than double in the next three years, however, reliance on shared service centers will increase slightly as well, with that expected to remain the preferred sourcing alternative for finance by a wide margin.

While the majority of shared service centers used are currently onshore, companies said they plan to nearly double their use of offshore shared services over the next three years, from 7% today to 13%.   According to the release, this makes offshore shared services nearly twice as attractive as outsourcing to companies, today and in the near future.

Hackett Senior Business Advisor Julio Ramirez said in the release, “There’s no doubt that there are potential benefits to outsourcing finance, such as leveraging lower-cost labor or getting access to critical systems to enable process automation. But companies can get much of this benefit by taking a best practices-driven approach to shared services. Then, once they have streamlined and centralized, they often look at whether finance processes can be eliminated completely through technology, and sometimes consider selective outsourcing. But in most cases, companies see the perceived risks of outsourcing finance, led by compliance and control concerns and unknown total costs, as far outweighing the benefits.”

In addition, the study found that, currently, companies report that 27% of finance processes remain decentralized, making this the second most popular sourcing alternative. However, in three years, companies said they expect this number to be reduced by more than half. At the same time, in addition to an increase in the use of shared services, companies said they expect to increase by 150% the number of finance processes that are fully automated.

Research from The Hackett Group can be found at www.thehackettgroup.com .   Registration is required.