Finance/HR Jobs to go Offshore

          Crying Time for 1.5 Million Service Professionals

I know I've recommended a number of articles for people to read. This is one that should be taken while sitting down. Hackett Group (http://www.informationweek.com/news/showArticle.jhtml?articleID=193402615), a part of AnswerThink, is releasing a report on Nov. 7 that suggests that the Fortune 500 could save $58 billion a year by moving a number of general & administrative (G&A - That is, finance and HR) positions offshore.

This prognostication has been anticipated. We've seen architectural, engineering and IT jobs moved offshore. The time for payroll clerks, accounts payable clerks and supervisors, general accounting specialists, fixed asset accountants, management reporting personnel and many others to face the grim news has come.

Those that will be most affected will be lower level accounting and HR personnel. These people have positions that business process outsourcers(BPO) like GenPact, OfficeTiger, Accenture and others can do well and at lower cost. Some of the BPO firms will offer one-time labor arbitrage while better firms will deliver continuous improvements to their clients. Smart buyers will sort out this differentiator.

Fortune 500 firms will have to move to lower cost G&A solutions simply because domestic processing costs them competitively and Wall Street will demand better performing back office functions. The cost of back office operations has dropped in U.S. businesses from about 4% of total revenues in the 1950s and 1960s to around 1.5% of total revenues today. Well run firms can do this in about 0.4% of total revenue (all stats are for $1 billion+ revenue firms).

If companies choose to keep G&A internally, they will need to seek a global shared services environment where many G&A functions are performed, more cost-effectively, in lower cost countries (e.g., Ireland, India, China, Eastern Europe). What won't be cost effective is to permit the continued use of complete, redundant G&A groups in every country where a firm operates. Not every country's operation needs to do its own invoice matching and payment processing. Likewise, many payroll and general accounting tasks can be consolidated into lower cost service centers. Where work is done is not country specific.

Smaller companies will simply have to outsource to remain competitive.

Change is definitely afoot. This Hackett report will spark some serious discussion in the executive teams of large and small firms. How will your firm react?