DALLAS, Oct. 26, 2006 (PRIMEZONE) -- A new report released by the Everest Research Institute reveals the energy, utilities and manufacturing sectors are dominating 50% of expenditure in the rapidly growing Finance & Accounting Outsourcing (FAO) market that is experiencing 40% growth this year to reach the $2 billion level. While the energy and utilities sector is reaching a level of market maturity after several early inception clients, namely BP, TXU and Marathon Oil, the recent growth surge has been fueled largely from the manufacturing and CPG industries, with no sign of this stopping in the near-term. Retail and financial services are the most under-penetrated sectors with the high untapped demand.
"Our analysis revealed that FAO adoption is on the rise across all major verticals given the favorable industry dynamics," said Saurabh Gupta, Senior Research Analyst, Everest Research Institute. "However, the FAO market continues to be grossly under-penetrated, implying huge value-creation potential. We expect the market to continue to grow at more than 30% a year for the foreseeable future."
The report found that the energy & utilities sector has been recently outpaced by the manufacturing industry, which now has the largest FAO market share and represents 25% of the overall market. Energy & utilities continues to be the most advanced industry in terms of scope and breadth of outsourced F&A processes, with 30% greater F&A process scope than the industry average. The FAO market in retail is still nascent, but contract signings have seen a spurt since 2003, and FAO is now also being seriously evaluated by financial services as a viable option to reduce operating costs with over six new major contracts since 2005.
"The sweet spot for future FAO uptake lies in the financial services industry," said Phil Fersht, Vice President, Everest Research Institute. "Several financial services buyers have been adopting higher-value processes, for example management reporting, financial analysis and forecasting, in smaller single-process contracts; but many are now considering under-laying these with widespread transactional F&A processes on a much wider scale. Culturally and emotionally, it has been harder for financial services firms to transition management of their F&A processes over to a third party as they play a core role in the day-to-day running of their business, but this is going to change over the course of the next couple of years."
Fersht concludes that the key factors driving CFOs towards FAO transformation is the intense pressure to reduce transactional costs from within their own departments, exploit the rich utilization of low-cost talent resources through globalization, and achieve greater manageability of their finance function across business units and geographies. "Moreover," he added, "When CFOs see their industry peers gaining a competitive advantage through FAO, many are being forced to follow suit to remain competitive."
For more details in the new Everest Research Institute report, please contact Peter Bowes at pbowes@everestgrp.com or call 508-359-9356.
About Everest Research Institute
Everest Research Institute (www.everestresearchinstitute.com) serves as a central source of strategic intelligence, analysis and actionable insight for corporate buyers, service providers and investors in the global business process outsourcing and information technology outsourcing marketplace. The Institute is dedicated to providing the global outsourcing community with the information it needs to build highly productive outsourcing relationships and programs, focusing on the drivers that are continually reshaping the industry landscape and analyzing how they impact member organizations and the success of their outsourcing strategies. The Institute's distinguished Board of Advisors, all senior executives and thought leaders in global outsourcing, oversee the Institute's research agenda to ensure that it fully supports the business information needs of corporate buyers, service providers and investors.
Everest Research Institute was established by the Everest Group, which provides strategic advisory services that help companies harness the power of outsourcing. Since its formation in 1991, Everest Group has served as business advisors for hundreds of IT and business process outsourcing transactions worldwide.