Outsourcing jobs: Does it work in Asia-Pacific?
Updated: 2008-03-05 07:17
By Martin Fahy(HK Edition)
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As more and more businesses focus on what they do best, the need to outsource common office tasks is growing.
Besides traditional IT outsourcing, business-process outsourcing (BPO) includes jobs such as cash collecting, claims processing, invoicing, payroll and customer support.
So why outsource internal services?
The desire to reduce cost is one reason. Others include poor performances from inter-office departments, as well as the availability of cheaper, better and more-effective alternatives from third-party providers.
When they realize they need to trim overhead and eliminate less efficient departments, managers' thoughts often turn to outsourcing.
In the case of the finance function, CFOs are faced with the dual challenge of meeting an increasing compliance burden and reducing costs. Increasingly, firms see moving the problem out of the organization as the most prudent and easiest course of action to achieve necessary efficiencies.
While the global trend towards outsourcing seems relentless, recent research by Chartered Institute of Management Accountants (CIMA) suggests that the appetite for outsourcing, and in particular, finance and accounting outsourcing (FAO), is not as great in the Asia-Pacific region as it is elsewhere. Our discussions with senior finance professionals in the region suggest that issues such as distance, language culture and the smaller opportunity for labor arbitrage make outsourcing less attractive than in higher-wage regions such as the United States and Europe. In addition, the differences in the regulatory environment, including currency regulations, capital-markets issues and local-compliance issues, make it more difficult to centralize back-office functions across the Asia-Pacific region.
As one multinational CFO pointed out, "in Europe and the United States, moving to an offshore-BPO approach provides big benefits in terms of lower labor costs, cheaper rents and greater efficiency. But in Asia, there aren't the same benefits; labor arbitrage is not as great and the overall savings are lower".
While our research found that respondents expected the amount of FAO to double in the future, the overall levels of adoption of BPO would still lag behind that in the US, Middle East, Africa and Europe.
The main concerns firms had with outsourcing finance and accounting activities included losing control, regulatory issues and the high levels of staff turnover in some of the third-party delivery centers in offshore locations.
While the majority of firms will move slowly towards BPO for finance-transaction processing, leading firms will leap ahead to exploit the extensive educational talent available from offshore delivery centers.
The author is a former Asia-Pacific director of Chartered Institute of Management Accountants.
(HK Edition 03/05/2008 page3)