The take-up of finance and accounting business process outsourcing (F&A BPO) services by European companies will nearly double over the next five years, from its present size of $5.1bn to $9.6bn (£5.2bn) by 2008, market watcher IDC has predicted.
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Accounting scandals in the US which have lead to legislation such as the Sarbanes-Oxley Act and given companies new reasons to overhaul their finance and accounting systems in the US and elsewhere.
The analyst said similar forces are at work in Europe, with legislation proposed by the International Accounting Standards Board and the European Commission set to require all publicly-traded EU companies to prepare their consolidated financial statements in accordance with one single set of accounting standards, International Accounting Standards, by 2005. IDC said the requirements of IAS 2005 are likely to generate ‘considerable costs’ for European multinationals as they bring their national systems in line.
‘These considerations as well as the need to reengineer complex, outdated business processes relating to accounts receivable, accounts payable, and general ledger, for example, are therefore encouraging large European multinationals to consider outsourcing their F&A processes and systems to third-party providers. For customers, the benefits of standardisation will be the cost savings that can be achieved through leveraging the outsourcer’s F&A transaction capabilities across multiple clients (on a one-to-many model),’ the analyst said in a statement.
IDC research manager Mike Friend said in a statement: ‘While cost remains a prime motivator for outsourcing, the emergence of service providers with both the process and technology expertise to reengineer processes to meet the requirements of the modern business environment has placed a growing emphasis on improved customer service and shareholder value,’
‘Dragging along inefficient and under-funded support functions, while at the same time fighting off lean and mean competition, has obvious consequences in terms of cost of operations, customer satisfaction, and market share,’ added Friend.