High Quality Outsourcing, Way of the Future
High quality outsourcing has become an increasingly vital component in the global business landscape, and a critical fixture in accounting. The sector has seen consistent growth, with the value of the global outsourcing market expected to reach USD 971.2 billion in 2023, a significant 60% increase from USD 606.9 billion in 2016.
This trend is expected to continue with a projected growth of USD 75.89 trillion between 2023 and 2027[1]. Understanding what’s driving this growth is crucial for businesses looking to adapt and thrive in the evolving economic environment. Let’s look at the four key factors:
Need for Better Margins as Inflation Tightens Belts: Outsourcing in the accounting sector has emerged as a pivotal strategy for firms looking to enhance efficiency and manage resources effectively. The global market for accounting outsourcing has witnessed a substantial upsurge, with the industry's growth underscored by an increasing demand for specialized accounting expertise and the need for cost-effective solutions[2]. The trend towards outsourcing accounting functions is expected to continue its upward trajectory, mirroring the broader trend in the outsourcing sector.
Lack of Suitable Local Candidates in the CPA Industry: The U.S. is experiencing a significant shortage of certified public accountant talent, prompting advisory industry executives to express concerns about finding trusted CPA partners domestically. This shortage has led many firms to outsource significant tax planning work to countries like India[3]. Lisa Simpson, Vice President of Firm Services at the Association of International Certified Professional Accountants, acknowledges the challenge in replacing accountants leaving their jobs in significant numbers. This gap is propelling the outsourcing trend as firms seek skilled professionals from a global talent pool.
Glut of Highly Educated and Motivated Candidates Overseas, Especially in India: India remains the most attractive offshore outsourcing country, particularly for the European and American markets. Its financial attractiveness, expertise, and availability of skilled personnel are key factors in its prominence in the outsourcing sector[1]. The increasing interest among students in countries like India in the accounting profession, coupled with the recognition of U.S. CPA licensure for international candidates, has created a robust pipeline of highly skilled professionals. Many U.S. firms now leverage licensed CPAs who reside outside the U.S., a trend expected to continue.
Increased Adoption of Outsourcing for Key Business Functions: Over half of all companies use outsourcing for critical business functions such as legal, tax, HR, or finance, with more than three-quarters outsourcing IT functions like cybersecurity, app development, and IT infrastructure services. Furthermore, companies are spending more on outsourcing, with 67% of executives reporting an increase in their operating services budget, and 57% spending more on managed services. Cost savings are a significant reason for the increased use of traditional outsourcing models, with 57% of decision-makers citing this as a motive[1].
These factors collectively indicate a robust and growing reliance on outsourcing as an integral part of modern business strategies. The blend of economic necessity, talent shortages, and the abundance of skilled professionals overseas, particularly from countries like India, is reshaping how companies approach key business functions and prepare for future challenges. As the world grapples with economic fluctuations and technological advancements, outsourcing stands out as a critical tool for businesses seeking efficiency, expertise, and economic viability.
By thoroughly evaluating potential outsourcing firms against these criteria, you can find a partner that aligns with your CPA firm’s values and needs, ensuring a successful and beneficial outsourcing relationship.
"The global outsourcing sector in 2023 - stats, facts and trends." Krusche & Company. Accessed November 24, 2023. https://www.kruschecompany.com/global-outsourcing-sector-2023/.
Allied Market Research. 'Accounting Services Market.' Accessed November 24, 2023. https://www.alliedmarketresearch.com/accounting-services-market-A12933."
"Emerging CPA Shortage Is a Solvable Problem: AICPA." ThinkAdvisor. Accessed November 24, 2023. https://www.thinkadvisor.com/2023/02/15/emerging-cpa-shortage-is-a-solvable-problem-aicpa/.
