Finance and accounting (F&A) organizations will not renew 60% of their existing business process outsourcing (BPO) contracts by 2025 because of outdated pricing models that do not drive digitization and process improvement, according to Gartner, Inc.
Gartner analysts discussed today how finance leaders can ensure sustained value from their outsourcing partnerships during the Gartner CFO & Finance Executive Conference, taking place virtually, May 25-26.
“The era of headcount-based BPO, where the cost is calculated based on the number of full time equivalents (FTEs) needed to complete the work, is becoming obsolete in an age when conducting finance processes efficiently is not reliant on large pools of labor,” said Sanjay Champaneri, research director in the Gartner Finance Practice. “Automation efforts have resulted in fewer, or no humans, required to deliver the work.”
BPO providers have invested in capabilities that allow them to reposition themselves from just a delivery model service for transactional activities with partial automation to one that can meet finance buyers’ objective to become digital.
These providers have several advantages when it comes to effecting successful automation initiatives: Economies of scale, large volumes of transactional data and global access to digital talent in the form of software engineers and data scientists. But providers who do not flex their pricing model accordingly will find themselves losing out to those who do (see Figure 1).