F&A BPO throws up challenges, opportunities

Traditionally done in-house and slowly outsourced in parts, finance and accounting (F&A) is fast becoming a candidate for extensive business process outsourcing.

The market, several research firms forecast, will become huge in a few years for F&A business process outsourcing, including offshored work.

F&A BPO is a likely area where the strong growth of last year is likely to continue and even increase: Industry sources say, the total F&A services by 2008 will be some $114 billion, according to a Yankee Group forecast made in 2003. Of this, F&A BPO will be $17.2 billion from last year's $11.2 billion, the analysts firm forecast, sources said.

Indian firms will have to compete with the first-movers of the world in scale and range of services offered - exploit the trend towards "transformational BPO" or multiple tasks that knit together to form viable "solutions" for customers.

It could include a few or all of F&A tasks such as accounts payable receivables, general accounting, risk management, financial reporting, financial management, and shareholder services. The first two have formed the bulk of F&A outsourcing so far.

Competition will be tougher in BPO because unlike IT services, it almost always involves the customers of customers. So "the opportunities for business are as great as the chances of devastating, not to mention humiliating, public failure," according to a Gartner report, industry sources told Business Standard.

More familiar with outsourcing now, large buyers of BPO, from banks and insurance firms to airlines, are ushering in the strong growth of BPO even before validation ends in key areas.

On the supply front, offshoring BPO is part of a multinational vendor's go-to-market strategy from the start - a lesson such firms quickly learnt from the success of peers such as Texas Instruments and later, Indian firms such as Wipro.

Accenture, which has seen business in F&A outsourcing for over a decade, is perhaps the best example of how multinational firms have ramped up in India. Pakaj Vaish, head of Accenture's BPO operations in India, says, the firm is seeing "an ever increasing interest" in F&A outsourcing, and a corresponding increase in its client base.

Sometimes, BPO providers can actually provide services beyond the in-house capabilities of customers, Vaish says. Last year, some 37 per cent of Accenture's $13.67 billion revenues came from "IT and BPO services", he says, accounted for by over 40 centres worldwide.

"From our India delivery centres, in F&A BPO, we offer all services from purchase to pay, order to cash and account to report. So almost the entire value chain in F&A BPO are being offered from our delivery centres in India. In most cases, the clients are aware that the work is being delivered from India," he says.

This however, doesn't mean the larger Indian firms are being left behind. A recent Gartner survey found Wipro offered BPO services in all but two horizontals that Accenture was present in.

The survey showed, the two missing services were in Federal Government Operations and State and Local Government Operations. Infosys, had only one other missing horizontal - administrative services. Both were present in F&A, sources said.

The other horizontals included human resourcess, F&A, payment services, administrative services, supply chain management, financial services operations, manufacturing operations, transportation operations, healthcare operations and telecommunications operations. There were other Indian firms as well, present in more than one of these, such as Office Tiger and Patni.

But, firms such as Accenture are building on their traditional access to decision makers in large companies that buy BPO services.

They are addressing the political and business implications of F&A head on, clearly demonstrating their offshore strategies, and offering a mix of geographical locations when customers want it.

Indian firms, relying on offshore work to boost profitability, may have to learn to live with this.

Wipro, however, said in a web-based seminar that 87 per cent of customers of e-Loan, a US based mortage company, chose to work with the offshore model, in return for faster processing of their loans. The American firm had contracted Wipro to process its mortgages, Wipro said in that October 2004 "webinar".