Note: this report is from 2012. See our most recent R2R research report.

The Finance & Accounting (F&A) function comprises three end-to-end processes – Procure-to-Pay (P2P), Order-to-Cash (O2C), and Record-to-Report (R2R). This report focuses on the third-party outsourcing of R2R activities.

General accounting and reconciliations are the most frequently outsourced R2R activities given their transaction-intensive nature. However, with increasing maturity of the Finance & Accounting Outsourcing (FAO) market, organizations are increasingly looking at outsourcing more judgment-intensive R2R activities, such as Financial Planning & Analysis (FP&A), regulatory reporting, and compliance. Further, an end-to-end, process-driven approach towards outsourcing is emerging as opposed to a piecemeal, functional approach. The role of technology and automation in R2R outsourcing is also increasing. Consequently, the value proposition is expanding beyond direct cost reduction to creating creation of favorable business outcomes around close cycle, bad debts, and regulatory compliance.

In this report, we investigate the market state of R2R outsourcing. We focus on:

• Definition, value proposition, and challenges of R2R outsourcing
• R2R outsourcing market size and growth
• The emerging and current solution trends
• R2R service provider landscape and capability assessment

Scope of analysis

• The scope of this report is third-party outsourcing and does not include internal shared services
• The report provides global and cross-industry coverage of the R2R outsourcing
• The report is based on Everest Group’s proprietary database of over 1,000 FAO contracts signed till the end of 2011 and operational capability of more than 20 FAO service providers that offer R2R services

Content

With growing maturity witnessed in the FAO market, buyers are now willing to expand the scope to include end-to-end processes such as R2R that impact metrics related to business outcomes. Also, service providers continue to make significant investments to meet buyer demands and create a differentiated offering. This report analyzes the key trends in R2R outsourcing within the FAO market. It provides an understanding of the business value, adoption characteristics, and service provider capability in R2R outsourcing. Some of the findings in this report, among others, are:

• R2R outsourcing has a strong cost plus value proposition. It can deliver higher business value through better compliance, standardization, and reduced time-to-market
• R2R activities are typically included in phase II (renewals/extensions) of an outsourcing relationship. However, inclusion of R2R activities in new FAO contracts is also increasing
• Inclusion of R2R activities across most industries varies between 60-80%. However, less than 50% of R2R activities are typically outsourced
• R2R activities are typically bundled with P2P and/or O2C in FAO contracts
• An end-to-end R2R approach is starting to emerge (25% end-to-end R2R contracts were signed in 2011 compared to less than 15% in the past)
• Provider landscape for R2R outsourcing services is dominated by multi-process FAO providers. Only a few service providers exclusively focus on R2R
• There are four key themes of recent service provider investments in R2R capabilities: 1) technology/platform 2) risk and compliance solutions 3) analytics 4) onshore delivery