Moving beyond Transactional FAO: The Rise of FP&A Outsourcing

14 Dec 2010

$2,999.00

Introduction

The multi-process FAO market constitutes various F&A processes that differ in their degree of outsourcing, with some processes outsourced less often than others. Financial Planning & Analysis (FP&A) is one such segment that is not outsourced as frequently as some of the mature offerings like accounts payable, accounts receivable, or general accounting. Nonetheless, the value proposition of outsourcing FP&A is strong and the past few years have witnessed significant market activity in terms of FAO contracts including FP&A scope. In recent years, many FAO service providers also enhanced their FP&A capability to increase their market share in this “high-value” segment within the FAO market.

In this study, we analyze the global multi-process FAO supplier landscape in 2009. We focus on:

  • Market size and buyer adoption of FP&A outsourcing
  • Value proposition and contract characteristics
  • Service provider landscape in the FP&A outsourcing market segment
  • Implications for key stakeholders

Segment share by FAO market ACV 

Scope and methodology

  • Third-party FAO deals; it does not include shared services or captives
  • 470+ multi-process FAO contracts signed as of November 2009 with a minimum of two F&A processes, over US$1 million in ACV, and a minimum contract term of three years
  • Coverage across 20+ FAO service providers with multi-process capability including Accenture, ACS, Capgemini, Cognizant, EXL service, Aditya Birla Minacs, Genpact, HCL, HP, IBM, iGATE, Infosys BPO, Intelenet, KPIT Cummins, OPI, Patni, Steria, TCS, VWA, Wipro, and WNS

Everest Performance | Experience | Ability | Knowledge (PEAK) Matrix for FAO 

Content

This report will assist key stakeholders (buyers, service providers, technology providers) understand the trends in outsourcing FP&A processes within the FAO market. Though this is a relatively less mature segment of the global FAO market, it holds a strong value proposition and has witnessed significant market activity in the last few years. In this backdrop, this report provides comprehensive coverage of the FP&A market segment including detailed analysis on market size and buyer adoption, value proposition and contract characteristics, and service provider landscape. Some of the findings in this report, among others, are:

  • FP&A commands a much lesser market share vis-à-vis mature offerings such as Procure-to-Pay (P2P), Order-to-Cash (O2C), and Record-to-Report (R2R). However, it commands a much higher price per FTE compared to these offerings. The highly analytical and judgment-intensive nature of FP&A processes demands a superior skill set leading to a higher market price for such services
  • The past few years witnessed notable instances of FP&A outsourcing, and more frequently during contract extensions as compared to new contracts. Nearly 70% of the contract extensions signed from 2005 to 2009 included FP&A scope, as opposed to 55% of the new contracts signed in the same period
  • Similar to the overall market for FAO services, the majority of buyers of outsourced FP&A services are U.S.-based manufacturing and retail companies. Compared to large and mid-market buyers, a higher percentage of small buyers have outsourced FP&A scope
  • Key drivers to outsource FP&A scope are enhancing managerial efficiency, access to optimal skill-mix, improving process visibility and service levels, and achieving direct-cost benefits
  • The technology landscape in FP&A processes is largely dominated by online analytical processing (OLAP) tools and applications
  • While multiple pricing structures exist in the overall FAO market, FTE-based pricing is the model prevalent in the FP&A segment
  • The percentage of contracts with an onshore delivery component is much higher for FAO contracts that include FP&A processes in scope compared to contracts without any FP&A scope
  • Most of the service providers with a notable FP&A capability are either leaders or major contenders on the Everest FAO PEAK matrix. As many as 60% of the FAO service providers tracked by Everest have a sizeable FP&A offering
  • PEAK leaders clearly dominate the FP&A market segment in terms of both market success and capability
  • However, in the last few years many service providers increased their share of contracts with FP&A scope. Genpact, HP, and Infosys (among leaders) and WNS, Wipro, and TCS (among major contenders) were able to increase their share of contracts including FP&A scope signed since 2006
 

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