The FAO market has matured significantly compared with three years ago when FAO Research launched and this market was relatively nascent. Here are just a few tidbits that I find interesting about what has happened in the FAO space recently and some of the directions this market is heading:
Online Outsourcing: It may not be a significant concern today, but products like Microsoft's foray into outsourcing with www.taskmarket.com proves yet another way that small and medium-sized companies may go when opting to outsource select functions. It's VERY new, but developing the concept out into the future, FAO technically can take some of that route. Not quite the leverage that the traditional FAO model can offer, but still...for those ambivalent to outsourcing finance either at all or offshore - it's an interesting concept. Same with SOA. I know of another company getting ready to launch an online portal/marketplace for suppliers/buyers, specifically SMEs, to engage in outsourcing. The model is shifting...
New Outsourcers: The supplier landscape continues to shift also. Although not quite "new", services companies Cognizant and Logica have popped up lately in terms of getting business successfully in FAO. Many sourcing advisors with whom we work closely still are unfamiliar with their total packages, coming to us with questions. Outsourcers like these, including Quattro, are on a tear to educate the market. Buyers certainly are starting to listen.
Blended Sourcing Model: It's not a new term, or a shift in something familiar, but one that I have heard in the FAO sales process moreso than not lately to describe a flexible, user-friendly type of approach to FAO - onshore, offshore, nearshore, onsite. Certainly may help allay fears with regard to third-party management of Finance functions.
Big P&G Deal: The huge industry buzz is P&G's new HRO deal with IBM valued at $400M. (You might remember that P&G outsourced ITO to H-P in a $3B, '03 deal also after lots of competitive in-fighting.) For a company with huge competitive concerns AND an appetite for outsourcing, P&G definitely will put FAO next. Same with Bristol-Myers Squibb and others undergoing restructuring. (Btw, I know this not of fact but from insinuation.) BMS just indicated that back-office operations, finance, IT and human resources departments will be hit the hardest by the intended job losses, with outsourcing and offshoring being a strategy that it plans to embrace.
Rise of the Middle East and Africa: I've seen this two years coming, but Middle Eastern countries finally are organized enough to have just hosted the first-ever "Middle East International Banking, Financial Technology and Services Exhibition and Conference" in Dubai. FAO is a market they definitely want to tackle also, as FAO Research had worked with the head of their Dubai Outsource Zone when it first launched. We also are seeing South Africa trying to woo FAO supplier/buyer investment.
Outsourcing now is a PLUS: And we see this concept finally becoming mainstream - so much so that it's actually a "positive" growth factor in the eyes of many stock analysts' ratings of companies. Check out this comment on American Axl (AXL): "It's focus on improving its product mix, diversification of client base, and outsourcing to low-cost countries are some of the positives of the stock." Another great article that I suggest you read came out a few days ago in a UK-based financial publication.
It's an exciting time to be part of this industry. Ever changing indeed.
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