Companies Need Digital-Ready Contracts That
Not Only Deliver Cost Reduction But Also Focus on Business
Value Creation and Innovation
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.
The recent study by The Hackett Group® also found that more than
70% of respondents expect their FAO service provider to help their
company drive greater value through implementation of the latest
technology (e.g., advanced analytics (AA), robotic process
automation (RPA), machine learning (ML) and artificial intelligence
(AI). However careful crafting of contract terms was found to be
critical for clients getting more of what they wanted from these
long-term partnerships (e.g., cost savings, business value creation
or innovation).
Digital World Class® FAO service providers were found to
enable companies to achieve dramatically higher value creation than
typical companies, including:
- 99% greater ability to collect receivables within terms
- 41% faster financial reporting and improved closing cycle
- 47% lower overall cost, translating into a $48-million annual
cost advantage (for a typical $10-billion enterprise)
Seven service providers achieved “Digital World Class” status in
the Hackett Value Matrix: Accenture, Capgemini, Genpact, IBM,
Infosys, TATA Consultancy Services (TCS) and Wipro. Five others
were classified as “Challengers”: Cognizant, Conduent, ExlService,
HCL Technologies and WNS. Three service providers were classified
as “Emerging”: Datamatics Global Services, Exela Technologies and
Sutherland Global Services.
“Our research found that nearly all companies that contract with
an FAO solution provider see cost savings. But the landscape has
shifted in the past few years, and today most companies also want
these relationships to drive greater value and innovation through
the implementation of technology. FAO solution providers have the
capability to deliver this, but it requires a very different
contract,” said The Hackett Group Associate Principal John
Sheridan.
“This market is also dominated by mature, well-established
providers,” Sheridan continued. “The future leaders will be those
that invest to take advantage of the latest digital possibilities.
To drive maximum value, companies are advised to focus on defining
and cementing a strong partnership with mutually beneficial terms
of engagement. They should select a solution provider that has
capabilities and technology partnerships most relevant to their
specific operating environments and needs. This is also a market
where you will only get what you have contracted for, so it is
critical to clearly reflect the desires for both cost savings and
innovation contractually.”
According to The Hackett Group Chairman and CEO Ted A.
Fernandez, “The FAO market is maturing quickly, from its origins in
labor arbitrage to a focus on automation and digitization,
cognitive automation and the delivery of cognitive insights. BPO
relationships are becoming a key part of digital transformation
journeys, and companies are expecting their BPO providers to help
them improve competitiveness, agility, resilience and
effectiveness, while still providing stable and high-quality
operational services.”
The FAO service provider Hackett Value Matrix and related
research are products of The Hackett Group’s Market Intelligence
Service. The service is designed to evaluate software and service
providers’ abilities to deliver quantifiable results from
specialized, differentiated capabilities.
The Hackett Group analyzed solution providers from the FAO
services market across the following three areas: Transactional,
control and risk management, and financial planning and analysis.
In transactional work, the research examined the following four
sub-areas: Purchase-to-pay, order-to-cash, record-to-report, and
consolidation and regulatory reporting. In control and risk
management, the following four areas were examined: Tax management,
cash management, capital and risk management, and compliance
management. Finally, in financial planning and analysis, the
research looked at business performance reporting and analytics,
and business analysis.
The Hackett Group defines Digital World Class, in the context of
the Hackett Value Matrix, as the attainment of top-quartile
performance for both operational excellence and value realization.
The Hackett Group observed and verified that these service
providers have deployed Digital World Class capabilities for
multiple clients. Furthermore, the providers have the abilities to
deploy this level of capability with new customers. For the FAO
market, this also means that providers need the right environments,
partnerships and contracts with their customers to achieve these
levels of performance.
The FAO Hackett Value Matrix is part of The Hackett Group’s full
76-page research report. This research is available now to service
providers, and research advisory and consulting clients through a
new FAO Market Intelligence Program that provides a concierge level
of insights into the FAO service provider market. The FAO Hackett
Value Matrix should be read in the context of the entire report. An
18m-page summary report is also available on a complimentary basis,
with registration, at
https://www.thehackettgroup.com/insights/fao-solution-providers-2312/.
Inquiries regarding purchase of the full research report can be
made at
https://www.thehackettgroup.com/insights/fao-solution-providers-2312-fullreport/,
or by visiting the web page for our Market Intelligence Service at
https://www.thehackettgroup.com/market-intelligence.
The Hackett Group does not endorse any participant, vendor,
product or service depicted in its research. This research should
not be considered as advice that a company considering FAO select
only those participants based on their ranking or position on the
FAO Hackett Value Matrix. The Hackett Group’s research publications
consist of the opinions of its research organization and should not
be interpreted as factual statements. The Hackett Group disclaims
all warranties, expressed or implied, with respect to this
research, including any warranties of merchantability or fitness
for a particular purpose.
About The Hackett Group
The Hackett Group, Inc. (NASDAQ: HCKT) is a leading
benchmarking, research advisory and strategic consultancy firm that
enables organizations to achieve Digital World Class
performance.
Drawing upon our unparalleled intellectual property from more
than 25,000 benchmark studies and our Hackett-Certified® best
practices repository from the world’s leading businesses, including
97% of the Dow Jones Industrials, 93% of the Fortune 100, 73% of
the DAX 40 and 52% of the FTSE 100, captured through our leading
benchmarking platform Quantum Leap® and our Digital Transformation
Platform (DTP), we accelerate digital transformations, including
enterprise cloud implementations.
For more information on The Hackett Group, visit
https://www.thehackettgroup.com, email info@thehackettgroup.com or
call (770) 225-3600.
The Hackett Group, Hackett-Certified, quadrant logo, World Class
Defined and Enabled, Quantum Leap, Digital World Class and Hackett
Value Matrix are registered marks of The Hackett Group.
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Statements including without limitation, words such as “expects,”
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version on businesswire.com: https://www.businesswire.com/news/home/20231213290507/en/
Gary Baker, Global Communications Director - (917) 796-2391 or
gbaker@thehackettgroup.com
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