What is Happening?
Research and analysis in a new ISG Provider Lens™ report indicate that the Finance and Accounting Outsourcing (FAO) market, though traditional in nature, is emerging as an innovative and technology-driven service segment. We see more and more providers with diversified portfolios and capabilities catering to the expanding and varying needs of different enterprise clients in this space. However, rapidly-changing enterprise client needs make it increasingly difficult for service providers to build expertise and offer services around every aspect of F&A outsourcing.
Our new ISG Provider Lens Report: Finance and Accounting Outsourcing (FAO) Services builds on months of research focused on services, key service providers in this space, and the global range of buyer needs in order to address this. The report summarizes the relative capabilities of FAO services providers and their abilities to address the requirements of four typical, frequently-encountered categories of enterprise user types (“archetypes”). Each archetype represents a unique set of enterprise user business and technological needs and challenges. And the ability to satisfy the needs of these archetypes is what’s going to enable provider success in an increasingly-diverse FAO marketplace. Even then, experienced guidance will be required to optimize the alignment of provider and services with archetype needs.
Why is it Happening?
When we know what users plan to accomplish, how they want to accomplish it, and what capabilities they require to do so, then we can better identify and/or develop suitable and repeatable combinations of IT services, whether as in-house IT resources or as outside IT providers.
However, knowing how to apply and adapt archetypal characteristics will be key to success for both sides. This is due in large part to two core realities regarding the archetypes:
- The characteristics of each archetype are a moving target over time, because while the core requirements rarely change, the relative importance of different requirements can vary based on business and/or technological environment changes.
- Multiple archetypes tend to be present in most enterprises, especially in larger firms. As the requirements of each archetype evolve and adapt based on business and technological changes, so too do the presence and value of each archetype.
This gives CFOs, CIOs, IT procurement leaders, and decision makers a shifting series of choices when it comes to FAO services provider selection. Striking and maintaining the proper balance between archetype requirements and service provider capability is a mandate to achieve optimal business value. Within the ever-evolving outsourcing space, it will be hard to standardize client requirements and map them against one particular client archetype without anticipating future needs.
For example: The key characteristics of what we call the “Automation and Transformation-Oriented” archetype appear on the left side of Figure 1. Their core needs today revolve around digitization and optimization of Finance. These clients were once traditional outsourcers, but are now embracing innovation and optimizing processes through transformation. ISG sees them mostly as 3rd generation outsourcers who are looking forward to changing their IT ecosystem and creating a difference with automation and analytics.
On the right side of Figure 1 are what our advisors working with these types of clients see as four key capabilities needed to satisfy client-side requirements. The relative size of the “gears” in Figure 1 represent the relative typical need for each within this client archetype. We use providers’ ability and approaches to delivering these as a key means of evaluating provider and service suitability for this archetype.
Figure 1: Mapping Client Needs with Provider Capabilities. Source: ISG Inc.
All that being said, these are depictions of archetypes that do not apply completely and strictly to all clients with similar needs. Adaptation based on experience is required to best gauge and align specific client needs within this or any archetype. And as clients within each archetype progress and mature, their needs will change, and so the relative importance of provider capabilities will also change
Readers of this report will understand better how to strike and maintain the proper balance between their Finance and Accounting requirements and service provider capabilities - and be better able to achieve optimal business value. FAO needs, possibilities, and benefits will be (a) better understood, and (b) more readily accomplished.
Both services providers and enterprise CFOs (and other Finance leaders, as well as outsourcing/services procurement leaders) will be better able to understand each other’s capabilities and requirements, enabling more value for both. Key report findings to enable this include the following:
- Service providers need to have a complete understanding of the client’s internal technology landscape and outsourcing objectives. They should be able to relate to the client’s existing archetype and their future requirements. This will enable them to design solutions while providing insights, more as a consulting partner.
- Enterprise clients need to understand their organizational characteristics to lay out an effective outsourcing plan and do a suitability analysis and choose service providers based on their requirement.
This new report is available for immediate download by clients of the ISG Insights Sourcing and Procurement (SPS) research knowledge area. Clients may simply log in and download a PDF of the report. Non-clients may obtain copies of the report by contacting ISG Insights at http://insights.isg-one.com/learn-more/.
Note: This report presents services providers’ known capabilities in the context of user enterprises’ typical project needs (i.e., archetypes). This report is not meant to rank providers or to assert that there is one top provider whose abilities can meet the requirements of all clients who identify themselves with a particular archetype.