Majority of digital finance transformation to be outsourced by 2026, says Gartner
Outsourcing began as a way to access cheaper labour. Now, finance leaders are using it to plug digital transformation talent shortages.
Digital transformations in accounting and finance will be conducted primarily via business process outsourcing (BPO) within two years, according to Gartner.
Vaughan Archer, senior director and analyst in Gartner’s finance practice, said the shift will be primarily driven by a demand for technology solutions and transformation expertise.
It takes an average of three years to build the capabilities needed to reach automation in digital financial, said Gartner. When outsourcing, it takes a third of the time while profit and loss savings are also typically seen within one year.
Tech shortages and the rapid pace of technological innovation mean that real digital transformations – those involving ongoing training and experimentation – will more often take place externally.
Finance and accounting BPO providers offer services as diverse as payroll, tax and audit support, budgeting, forecasting, and traditional accounting services. From machine learning and AI to blockchain, cloud technologies, and cybersecurity, getting access to workers with the capabilities required to make use of emerging tech is increasingly important.
At a recent Gartner conference, Alexander Bant, chief of research in Gartner’s finance practice, said anyone who has looked to hire generative AI-ready staff knows how costly the process can be.
Indeed, some have raised concerns that a rush for generative AI tech talent might mean that building the capabilities internally will become prohibitively expensive. As noted in the Harvard Business Review, leadership should consider longer-term hiring plans to avoid such an eventuality.
“CEOs must exercise caution to avoid a short-term rush for talent, which could lead to a dramatic escalation in GenAI talent costs,” wrote Hugo Huang, director at Canonical.
“Identifying talents that can be sourced externally versus those that demand internal promotion and training necessitates CEOs to establish a comprehensive talent roadmap during the initial stages of leading GenAI transformations.”
In the 1990s, outsourcing was seen primarily as a way to access cheaper labour. In the decades following, BPO providers improved their processes meaning, as a provider, it was “no longer enough to be low cost," said Mr Archer.
BPO is no longer solely a vehicle for labour arbitrage, he said. Now, businesses are relying on it to access specialised finance and accounting assistance. While businesses are spending less on outsourcing on average, when they are it is most often to meet tech skills gaps.
Sanjay Champaneri, senior director and analyst at Gartner, said leaders that outsource their digital transformation have a “greater chance of meeting cost optimisation objectives” while getting access to “finance technologies that accelerate digital agendas.”
The relationship between a BPO provider and a contracting company has substantially changed over time, said Mr Archer.
A willingness to bring clients into the fold on the processes involved in service delivery reliably differentiates good providers from bad ones, he said.
