ISG Provider Lens™ Finance & Accounting (F&A) Digital Outsourcing Services - Global Summary Report 2020
GLOBAL MARKET TRENDS
Strategic F&A outsourcing gaining momentum
After outsourcing transactional finance and accounting (F&A) processes such as procure-to-pay and order-to-cash and gaining enough confidence in their service providers for building F&A capabilities to serve clients end to end, several second and third-generation outsourcers are now beginning to engage with service providers more holistically so that they can focus on their core business activity. High-end and complex F&A processes, such as budgeting, forecasting, decision support, cash flow modeling, tax and compliance support, management reporting and audit support, which were usually retained in-house, are now being outsourced so that enterprises can get meaningful data and insights from service providers. They view providers as strategic partners that can empower CFOs with real-time insights and meaningful information to enable quick decision making and subsequently help finance departments to function more efficiently. To provide value to their clients, many service providers are continuing to invest heavily in re-skilling and upskilling their F&A resources in order to handle complex finance processes.
F&A leading the pack in back-office automation
F&A is one of the early adopters and the most common back-office function for the deployment of robotic process automation (RPA) by enterprises. According to the ISG Insights™ 2019 RPA Deployment & Capability study, over 83 percent of enterprises with more advanced automation capabilities have implemented RPA at scale in the F&A domain. Out of these, 75 percent have automated at least 35 F&A processes. The adoption of RPA combined with natural language processing (NLP), machine learning (ML) and intelligent optical character recognition (OCR) in F&A processes has helped finance leaders meet or exceed their expectations of cost savings, reduced time to market and process cycle time, high data accuracy, and improved compliance and customer experience. Processes such as customer billing, collections, order management, invoice processing, general ledger accounting and external reporting have been standardized and automated to a large extent. Leading service providers claimed that automation is an integral part of every contract they had signed for F&A services over the last two years. With the growing demand from enterprises to implement automation in F&A processes, service providers are continuing to prioritize their investments in automation and cognitive technologies either through in-house or partnership-driven F&A solutions.
Enterprises shifting gears to AI/ML-driven automation
While RPA has been successful at automating business’ rules-driven, high-volume repetitive tasks such as supplier invoice and receipt tallying, there are exemptions where RPA bots cannot accomplish certain activities. In such cases, enterprises are leveraging more intelligent F&A solutions that combine RPA with artificial intelligence (AI), NLP and ML capabilities. Fraud detection, invoicing and collections, reconciliations and exception handling, email categorization, and industry specific processes such as insurance claims processing are some areas where AL/ML is being applied. According to the ISG Insights™ 2019 RPA Deployment & Capability study, nearly 85 percent of enterprises have deployed ML in F&A processes, while NLP tops the list in experimenting at present and in the future.
Organizational change management remains crucial
Enterprises see organizational resistance to change as one of their biggest obstacles while embracing automation in their F&A functions. The introduction of robotic elements into finance processes may give rise to concerns about their potential impact on employment. Organizational change management (OCM) is continuing to play a vital role in helping employees to adapt to such technological changes. However, OCM tends to be an afterthought for most enterprises, while it should be at the forefront. Companies are working to ease their employees’ fears of being replaced by motivating them to embrace automation and building a culture of collaboration with bots for carrying out transactional F&A tasks. Forward-thinking organizations are collaborating with services providers to upskill the affected sections of the F&A workforce for handling complex processes of record-to-report (R2R) and financial planning and analysis (FP&A).
Analytics transforming CFOs into strategic partners
The role of CFOs has changed from mere bookkeepers to more of strategic thinkers. While it is crucial to have visibility over multiple departments on their spending, cost savings, cash flow, etc., deriving meaningful insights from the various types of transactions is a tedious task. Analytics plays a crucial role here by bringing those insights to the CFOs’ table, allowing them to make quicker decisions and providing greater visibility into what’s coming next. Analytics is also essential for financial planning, helping the typical CFO to become strategically oriented and instill a stronger focus on core business requirements. ISG Research™ observes that enterprises are leveraging analytics in areas such as collections, inventory forecast and demand planning, pricing and contract compliance, supplier risk and performance, closing cycle times, balance sheet risk, revenue assurance, fraud analytics, forecasting and budgeting. Today, analytics is an essential element of
every contract signed for finance and accounting outsourcing (FAO) services.
Growing demand for consulting-led transformation services
As the nature of engagements are evolving from a transactional to more of a holistic function, enterprises are more willing to transform their F&A operations and embrace digital technologies to make their processes more efficient and enhance customer experience. However, the lack of internal capabilities and knowledge is pushing them to look for transformational sourcing options to redesign their finance organization from end to end. To address this need, service providers have devised some key strategies to differentiate themselves. These involve offering end-to-end F&A transformation consulting services with an outcome-driven approach, coupled with deep domain and vertical expertise, a design thinking approach, investment in R&D, transformation frameworks, robust partner ecosystem, process redesigning, change management services, and innovative offerings around automation, artificial intelligence (AI) and advanced financial analytics.
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