Finance outsourcing firms push digital innovation despite cost reduction focus

MIAMI, UNITED STATES — A new study by The Hackett Group analyzing 15 leading finance and accounting outsourcing (FAO) providers found a mature market filled with well-established players offering similar capabilities.

The Hackett Value Matrix report assessed providers’ ability to deliver value and breadth of services. Over 70% of client respondents said they expect FAO partners to drive innovation through advanced technologies like analytics, robotic process automation, and AI.

However, the research found most existing contracts still focus heavily on cost reduction over digital transformation. The average client relationship length was 6-7 years, reflecting pre-digital legacy pacts.

“Our research found that nearly all companies that contract with an FAO solution provider see cost savings,” said The Hackett Group Associate Principal John Sheridan. “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.”

He added that FAO solution providers can deliver this, “but it requires a very different contract.”

The report identified seven “Digital World Class” providers able to reduce costs by 47% while accelerating reporting by 41% for a typical $10 billion company. However, differentiation was difficult in the crowded competitive landscape.

Successful provider selection requires clearly defining desired outcomes, capabilities, and cultural fit. Expert guidance can ensure contracts enable the desired balance of cost optimization and business innovation.

The Hackett Group Chairman and CEO Ted Fernandez also noted that 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.”