The Hackett Group

New FAO Service Provider Research Finds Wealth of Mature, Well-Established Solutions

A new Hackett Value Matrix analysis of 15 leading finance and accounting outsourcing (FAO) service providers by The Hackett Group, Inc. (NASDAQ: HCKT) finds that the market contains many mature and well-established service providers that deliver comparable levels of value realization and breadth of capabilities. The research recommends that companies seek assistance from expert advisors in the selection process to help them identify the partner(s) that best address their specific needs, and to shape and secure a digital-ready contract that is fully aligned to their business objectives.

In the past, most finance and accounting business process outsourcing (BPO) contracts focused heavily on cost optimization and labor arbitrage. Digital-ready contracts are specifically designed to move beyond this and add a focus on innovation and value creation, accommodating the deployment of digital technologies to automate and streamline a wide range of finance-related tasks. The goal is to deliver enhanced business value while also managing critical dependencies and mitigating key risks associated with their use. These contracts typically feature more complex definitions, incentive structures, governance mechanisms and commercial models that focus on supporting and/or enabling each organization’s unique digital transformational journey.

The Hackett Group’s research found that nearly 53% of customer respondents listed cost reduction as their original objective for the current BPO contract, with only 28% focused originally on transformation capability. This reflects the legacy or pre-digital nature of the underlying contracts, as the average age of the customer-vendor relationship among research participants was between six and seven years.

The research also found that given the many qualified service providers, differentiating factors will likely include alignment of capabilities and characteristics for the prospective partners with each client's unique business objectives and needs. Prospective clients should carefully consider elements such as geographic and process scope, industry sector, anticipated value realization, existing partner relationships (client-provider), level of maturity, investment appetite and cultural fit as they make their selection.