Big firms ‘prefer to keep accounting in-house’: Ovum

Companies with turnovers worth more than $500 million (£302 million) prefer to keep their finance and accounting (F&A) processes in-house, out of loyalty to existing staff and the perceived risk of offshoring.

The findings form part of a study by Ovum showing that loyalty to staff is a major barrier to the offshoring of F&A processes, and that cloud computing is generally considered less risky than using service providers in India or Central and South America.

Chief financial officers (CFOs) in the UK and the US rate outsourcing F&A activities to domestic service providers more efficient than looking elsewhere, with use of Indian companies considered an “unacceptable risk” by 38.5 percent of finance leaders at large firms.

According to the research, even the prospect of 20 percent cost savings would be unlikely to persuade most CFOs who don’t already outsource to start doing so, but those who do would switch vendors on the basis of a 15 percent reduction.

Ovum’s survey of leading finance executives puts India out in front in terms of offering the least expensive accounting services in the world, but rock bottom from the point of view of CFO satisfaction.

“Our survey found that offshoring to low-cost locations is deemed to be very high-risk and the companies we spoke to express a strong desire to keep these functions with their current employees,” said Ovum’s lead analyst Peter Ryan.

“There is a very real trade-off in terms of satisfaction versus cost,” he added. “India is known to produce some of the lowest-priced accounting staff in the world, but it would seem that in many instances, vendors are cutting corners as well as costs.”

Retaining the skills of incumbent employees, a sense of responsibility to current staff and not wanting to relinquish control of their finance functions emerged as some the main reasons why CFOs in the US and UK consider offshoring of F&A arrangements to be too risky for their business.

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