ISG Provider Lens™ FAO Digital Outsourcing Services - FAO Digital Operations - U.S. 2018
21 Aug 2018
by Namratha Dharshan, Shachi Jain
$2499
Advancements in technology have disrupted the outsourcing services market, especially the business process outsourcing (BPO) domain. The use of digital technologies has impacted every aspect of outsourcing engagements, from service delivery, pricing models and contract durations to KPI measurement and innovation delivered. The Finance and Accounting Outsourcing (FAO) service line has also undergone transformation because CFOs now require anytime, anywhere information to make business decisions faster. Finance is no longer a support function in an organization, but is a critical component of business strategy. Finance executives are under pressure to leverage emerging technology and adapt to changing business conditions and regulatory environments with much less lead time.
Some of the key trends in the finance and accounting outsourcing area are summarized in the following sections.
Analytics is being used to make the finance function agile. Real-time insights are helping make companies agile. Analytics is a key driver to improve decision-making through components like dashboards that give insightful information for mitigating losses, reducing days sales outstanding or providing prescriptive actions to improve cash flow. CFOs are increasingly leaning toward prescriptive analytics to support faster decision making. They no longer want to wait until the end of the month to get visibility into cash flow, outstanding payables, sales or inventory.
RPA is driving outsourcing conversations. The finance and accounting domain has been one of the early adopters of RPA technology. Processes like order-to-cash (O2C), procure-to-pay (P2P) and record-to-report (R2R) have been standardized and automated to a large extent, thereby helping service providers to drive the outsourcing conversation towards up-front savings and productivity gains. Order-to-cash processes require an average of 43 percent fewer resources after being automated, according to ISG Automation Index research. Productivity of employees has increased by 24 to 143 percent compared to historical levels of 5 to 10 percent, according to ISG Research.
Intelligent automation is making inroads in outsourcing contracts. The advent of advanced technologies like adaptive optical character recognition (OCR), which leverages analytics to identify documents and their content and natural language processing (NLP) capabilities has enabled judgment-based processes like exception handling and fraud detection to be automated. Adaptive OCR technology, along with machine learning capabilities, can make systems more efficient and identify patterns to further reduce the need for human intervention. Approximately 47 percent of enterprise clients are looking to adopt natural language processing, machine learning, RPA, autonomics, virtual customer agents or related technology, according to an ISG survey on automation and artificial intelligence.
Demand for cloud-based FAO services is increasing. Cloud-based F&A solutions have become more common than expected in the marketplace, with vendors like NetSuite offering off-the-shelf products that are compliant with regulations and auditing standards. Enterprises are looking to transform their legacy processes and are leveraging the cloud to improve collaboration among different finance functions across the organization. Enterprises also want to reduce the cost associated with software upgrades while ensuring that their business is not bogged down by inefficient and outdated systems and spreadsheets.
Design thinking is becoming important. As enterprises increasingly view the finance function as a key business transformation driver, they are looking at the department holistically. The aim of a transformation exercise is no longer restricted to achieving cost efficiency in the back office, but often is to ensure seamless integration across front-office, mid-office and back-office operations and to achieve the right business outcome. Customer experience is becoming pivotal for business success and transformation. Applying design thinking principles to the transformation journey to achieve a seamless customer experience is imperative. Enterprises expect service providers to be able to understand the complete picture and the business objectives to assist in the transformation journey.
Demand for change management solutions is increasing. With enterprises undertaking complete transformation of their business and financial processes, they require change management services to make the transformation journey a success. In case of an F&A process overhaul, they need to get the employees and external parties, like vendors and suppliers, on board with the transition. Businesses usually expect the service provider to be able to provide required training and coaching to the CFO, CIO, finance executives and other parties involved in the processes. Providers need to focus on change management solutions for organizations and put in place an assessment framework, roadmaps, essential training modules and feedback methodologies to ensure the success of the transformation exercise.
Blockchain is disrupting the F&A supply chain. Many service providers are investing in blockchain technology and running trials or developing proofs of concept (POCs) with clients. The blockchain trials are underway with many U.S. clients with one or two live implementations. Current use cases predominantly focus on improving the visibility into supplier and vendor transactions as they move across different approval stages before payment. Service providers like IBM, Wipro and Conduent are making significant investments and working towards making blockchain a reality.
Some of the key trends in the finance and accounting outsourcing area are summarized in the following sections.
Analytics is being used to make the finance function agile. Real-time insights are helping make companies agile. Analytics is a key driver to improve decision-making through components like dashboards that give insightful information for mitigating losses, reducing days sales outstanding or providing prescriptive actions to improve cash flow. CFOs are increasingly leaning toward prescriptive analytics to support faster decision making. They no longer want to wait until the end of the month to get visibility into cash flow, outstanding payables, sales or inventory.
RPA is driving outsourcing conversations. The finance and accounting domain has been one of the early adopters of RPA technology. Processes like order-to-cash (O2C), procure-to-pay (P2P) and record-to-report (R2R) have been standardized and automated to a large extent, thereby helping service providers to drive the outsourcing conversation towards up-front savings and productivity gains. Order-to-cash processes require an average of 43 percent fewer resources after being automated, according to ISG Automation Index research. Productivity of employees has increased by 24 to 143 percent compared to historical levels of 5 to 10 percent, according to ISG Research.
Intelligent automation is making inroads in outsourcing contracts. The advent of advanced technologies like adaptive optical character recognition (OCR), which leverages analytics to identify documents and their content and natural language processing (NLP) capabilities has enabled judgment-based processes like exception handling and fraud detection to be automated. Adaptive OCR technology, along with machine learning capabilities, can make systems more efficient and identify patterns to further reduce the need for human intervention. Approximately 47 percent of enterprise clients are looking to adopt natural language processing, machine learning, RPA, autonomics, virtual customer agents or related technology, according to an ISG survey on automation and artificial intelligence.
Demand for cloud-based FAO services is increasing. Cloud-based F&A solutions have become more common than expected in the marketplace, with vendors like NetSuite offering off-the-shelf products that are compliant with regulations and auditing standards. Enterprises are looking to transform their legacy processes and are leveraging the cloud to improve collaboration among different finance functions across the organization. Enterprises also want to reduce the cost associated with software upgrades while ensuring that their business is not bogged down by inefficient and outdated systems and spreadsheets.
Design thinking is becoming important. As enterprises increasingly view the finance function as a key business transformation driver, they are looking at the department holistically. The aim of a transformation exercise is no longer restricted to achieving cost efficiency in the back office, but often is to ensure seamless integration across front-office, mid-office and back-office operations and to achieve the right business outcome. Customer experience is becoming pivotal for business success and transformation. Applying design thinking principles to the transformation journey to achieve a seamless customer experience is imperative. Enterprises expect service providers to be able to understand the complete picture and the business objectives to assist in the transformation journey.
Demand for change management solutions is increasing. With enterprises undertaking complete transformation of their business and financial processes, they require change management services to make the transformation journey a success. In case of an F&A process overhaul, they need to get the employees and external parties, like vendors and suppliers, on board with the transition. Businesses usually expect the service provider to be able to provide required training and coaching to the CFO, CIO, finance executives and other parties involved in the processes. Providers need to focus on change management solutions for organizations and put in place an assessment framework, roadmaps, essential training modules and feedback methodologies to ensure the success of the transformation exercise.
Blockchain is disrupting the F&A supply chain. Many service providers are investing in blockchain technology and running trials or developing proofs of concept (POCs) with clients. The blockchain trials are underway with many U.S. clients with one or two live implementations. Current use cases predominantly focus on improving the visibility into supplier and vendor transactions as they move across different approval stages before payment. Service providers like IBM, Wipro and Conduent are making significant investments and working towards making blockchain a reality.
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