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F&A Outsourcing Prices are Dropping. Are You Overpaying?
By Dennis Winkler, Director, Alsbridge, Inc. , Howard Davies, Director, Alsbridge ProBenchmark

Most companies that outsourced a portion of their finance and accounting (F&A) functions in the early to mid-2000s generated great savings at the time, but are now probably overpaying for the service levels they receive.

Now more than ever, sourcing buyers need to be prepared to aggressively renegotiate with their providers to increase service levels and decrease prices. Currently, market competition is driving F&A rates down even though the majority of local labor wages are increasing. The reasons for this are:

  • Providers are decreasing profit margins to get deals and increase revenues
  • Increased use of technology to automate processes results in greater efficiencies
  • Increased use of benchmarking in BPO deals results in re-pricing of some
  • higher-priced, out-of-market deals, thus driving down the market average
Benchmarking your F&A rates against current market prices is the best way to get market terms and to understand how your F&A deal compares to the market.

While benchmarking has been around for years, there has not been a long history of successful F&A benchmarking. F&A benchmarking makes more sense today than in the past as comparable data based on actual F&A outsourcing deals is now available. The key to successful F&A benchmarking is selecting the right benchmarker that can deliver real value during the buying, in-flight and contract renewal process.

Traditional cost benchmarking firms do not advise on deals, so they lack real market data and are not useful in assessing outsourcing deals where market price is the most important measure. Companies should select an independent, third-party outsourcing advisor that specializes in F&A deals and thus understands the pricing effects of different client environments, different policies and procedures, as well as different terms and conditions.

In this research paper, Alsbridge describes the F&A outsourcing market and the role of benchmarking in ensuring that service provider contracts remain competitive in an increasingly cost-focused market. You will learn:
    • Three reasons that market competition is driving F&A rates down (even though the majority of local labor wages are increasing)
    • Three primary times you should conduct an F&A benchmark
    •  Four fundamental components to consider when determining the value of renegotiating your F&A contract
    • Seven elements an F&A benchmarking clause should include


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