Points of View

Are Service Providers and Advisors Doing Enough to get Digital into F&A Processes?

Apr 17, 2016 Reetika Fleming

Finance and accounting outsourcing is a prime candidate in the industry for a “reimagining.” It’s time to get to the next generation of services evolution—As-a-Service delivery. F&A services buyers that are evaluating new agreements, renegotiating old ones, or expanding their range of work expect their service providers and advisors to bring them capabilities and thinking that align with the new pressures placed on F&A leaders, including how to better manage regulatory compliance and financial reporting, better use financial and non-financial data, make the close cycle more efficient, and have paperless audit trails.

 

Our recently launched research study, Finance In The Digital Age, outlines exactly these changing services buyer needs, successes and struggles, and the roadmap to “digital F&A.” The study provides a perspective on the services buyer, which was about 50% of the survey response base. About half of the 380 respondents, however, included F&A service provider executives (34%) and advisors, consultants and analysts (24%). Our analysis begged the question – while demand is gradually rising for digitally-enabled F&A operations, is the sell-side of the equation doing enough to enable it?

 

We asked service providers how aggressively their organization is taking measures to generate more digitally-aligned F&A engagements, and the results are telling—not enough. In the chart below, only between a quarter and a third are making hard investments in initiatives like RPA platforms (38% investing), revenue cannibalization (32%), analytics talent (32%) and risk-sharing to create digital solutions (31%).

 

How Aggressively Are Suppliers Chasing Digital?

Source: HfS Research 2016, Sample = 130 Enterprise Service Providers

 

The advisors, meanwhile, are placing bets to position themselves as digital F&A leaders for the future. Advisors in the study stated that in order to become digitally focused, they would consider investing in hiring a transformational leader to lead digital strategy (90% believed it would have an impact), followed by RPA skills (77%). These advisors want to position themselves away from the legacy BPO model. In order to drive business forward, they face an increasing pressure to support enterprise clients on digital initiatives.

 

HfS Research believes that in the next two to three years, we will see a real shake-up in the sell-side of F&A outsourcing. The service providers that are forward looking—investing in technology enablement and partnering with clients to co-create a more digitally-aligned operational environment—will see the majority of services buyers flock to them as they finally reach the bottom-of-the-barrel labor arbitrage benefits from their legacy providers. The advisors already believe this shift is underway—39% believe that service providers are vital partners that plug critical skill gaps, while 47% maintain that providers are a lever to drive down costs and improve efficiencies, and only a handful, 14%, perceive service providers as simply providing access to cheap labor.

 

The value proposition of finance and accounting service delivery is fast changing, and we at HfS are focusing on presenting broad industry perspectives that are leading and influencing the change. Catch us on a webcast this Thursday (21st April) at 11am ET as we discuss the findings of our new research report, Finance In The Digital Age, with more findings and implications for F&A services buyers, service providers and advisors.