By Gaurav Gupta

The Finance and Accounting Outsourcing (FAO) business is expected to rebound from pre-recessionary growth levels to clock 20% plus growth to reach US$ 3.7 bn, according to the Finance & Accounting Outsourcing Annual Report 2010, by Everest Group, a global consulting and research firm.

The year 2009 witnessed significant onshore FTE ramp-ups (especially in US) implying the growth of an onshore-nearshore-offshore delivery mix. However, the maximum growth from an offshore / nearshore standpoint took place in India (both tier 1 and tier 2 locations) and S.E. Asia. It is interesting to note that captives continued to be key M&A targets for suppliers.

Annual Contract Values (ACV) growth slowed to 11% in 2009, as compared to 20% plus growth rates observed in 2006-2008, according to the study. In the next 3 years, US$4.8 bn in FAO contracts are up for renewal.

The study also reveals that although the number of contracts signed was lower in 2009 compared to recent years, organic growth through contract extensions picked up significantly and contributed to almost 40% of the ACV growth in 2009. Only 9% of end-of-term contracts were terminated, largely due to macro-economic conditions such as buyer bankruptcies and lower transaction volumes.

Gaurav Gupta, principal and country head India, Everest Group said, “It is heartening to see that the year 2010 promises to be a stronger year for FAO and even in challenging economic environment buyers showed their commitment to the FAO model. As the global economy revives, most suppliers are reporting stronger sales pipelines.”

The FAO market growth continues to see aggressive adoption across manufacturing, consumer packaged goods, retail and high-tech sectors. Telecom and pharma are emerging sectors with the highest growth rates.

Source: The Indian Express