Hackett: Despite the Hype, Few Companies Outsourcing Finance While Shared Service Centers Remain the Preferred Option
April 18 2006 - 9:31AM
Business Wire
Study Shows That Only 4% of Finance Processes are Currently
Outsourced, While Companies Use Shared Service Centers 65% of the
Time Despite the widespread attention and publicity paid to finance
outsourcing, companies are doing very little of it today, and
onshore or offshore shared service centers remain the preferred
options, according to findings of a new Business Process Sourcing
study from The Hackett Group, a strategic advisory firm and an
Answerthink company (NASDAQ:ANSR). Hackett's study found that
companies today outsource only 4% of all finance processes, while
they turn to onshore or offshore shared service centers 65% of the
time. Companies said they expected their use of outsourcing to more
than double in the next three years, but reliance on shared service
centers will increase slightly as well, and shared services is
expected to remain the preferred sourcing alternative for finance
by a wide margin. While the majority of shared service center
utilization is currently onshore, companies also said they planned
to nearly double their use of offshore shared services over the
next three years, from 7% today to 13%. This makes offshore shared
services nearly twice as attractive as outsourcing to companies,
today and in the near future. "It's not hard to find people who
will tell you that comprehensive or full-service outsourcing is a
tremendous growth wave in finance right now. But our analysis tells
a very different story," said Hackett Senior Business Advisory
Penny Weller. "While companies are looking at expanding their use
of outsourcing and offshoring, it represents an almost
insignificant portion of their finance efforts today. In fact, it's
the least popular sourcing option we looked at. Meanwhile,
companies are seeing tremendous value in moving finance processes
to shared service centers, and are making this their primary
sourcing approach." According to Hackett Senior Business Advisor
Julio Ramirez, "There's no doubt that there are potential benefits
to outsourcing finance, such as leveraging lower-cost labor or
getting access to critical systems to enable process automation.
But companies can get much of this benefit by taking a best
practices-driven approach to shared services. Then, once they have
streamlined and centralized, they often look at whether finance
processes can be eliminated completely through technology, and
sometimes consider selective outsourcing. But in most cases,
companies see the perceived risks of outsourcing finance, led by
compliance and control concerns and unknown total costs, as far
outweighing the benefits." Hackett's study, which looked at 11
finance process areas, also found a clear trend away from
decentralized finance operations. Currently, companies reported
that 27% of finance processes remain decentralized, making this the
second most popular sourcing alternative. But in three years,
companies said they expect this number to be reduced by more than
half. At the same time, in addition to an increase in the use of
shared services, companies said they expect to increase by 150% the
number of finance processes that are fully automated. To see the
full version of this research, please click on the following link
for the Hackett Research Insight Center:
http://www.thehackettgroup.com/insights/fin0406 Companies
interested in participating in The Hackett Group's next annual
Business Process Sourcing study can visit the following link to
find and complete the survey form:
http://www.thehackettgroup.com/surveys/sourcing More information on
The Hackett Group is available: by phone at (770) 225-7300; by
e-mail at info@thehackettgroup.com; or on the Web at
http://www.thehackettgroup.com. About The Hackett Group The Hackett
Group (http://www.TheHackettGroup.com), a strategic advisory firm
and an Answerthink company, is a world leader in best practice
research, benchmarking and business transformation services that
empirically define and enable world-class enterprise performance.
Through the acquisition of REL Consultancy Group, a global leader
in generating cash improvement from working capital, we offer
Hackett-REL Total Working Capital services to liberate cash flow
from operations through improved working capital, reduced costs and
increased service quality. Hackett-REL has helped clients in more
than 60 countries free up over $25 billion through working capital
improvements in the last 10 years alone. Only The Hackett Group
empirically defines world-class performance in sales, general and
administrative (SG&A) and supply chain activities with analysis
gained through 3,500 benchmark studies over 14 years at 2,000 of
the world's leading companies. Our clients comprise 96 percent of
the Dow Jones Industrials, 77 percent of the Fortune 100 and 92
percent of the Dow Jones Global Titans Index.
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