Is ‘offshoring’ in your firm’s future?
(EXCERPTS FROM RECENT ARTICLE BY ROB NIXON OF Panalitix)
The accounting firm of the future has a local team who are customer-facing (nurturing, sales and advice) and everything else (back office and processing) is handled by offshoring.
There are three compelling reasons why this makes sense:
- An abundance of labor
- A labor force who are supremely qualified
- A lower cost structure
Let’s take the Philippines as a case in point. It is estimated that circa 1.3 million work in this space. It is growing every day. Their English is fantastic, the schooling system is very good, they are very family-oriented, the time zones are reasonable and the government is right behind the initiative with infrastructure. They cannot build the office towers fast enough…
All of this is globalization and a change in social behavior. I think the concept got off to a bad start with telemarketing companies calling you at home and you could not understand what they were saying. It also got off to a bad start because the term “outsourcing” was created. Many accounting firms sent jobs offshore and because the person worked on the job was not working 100 percent for that firm there was a lot of re-work needed.
As a disruptive trend we are seeing accountants use the available resource in the following way:
- Hiring marketing people to do the marketing work for the firm. I know of an Australian $4 million firm who has eight marketing team members offshore
- Hiring client service coordinators to handle data collection and job setup from clients
- Hiring bookkeepers to do bookkeeping work for clients – and charging clients @ $20 per hour and making a 5 times margin
- Hiring data integrity people to sort out client data before it gets to the accountant
- Hiring technical people who can do “cloud conversions” and other software help
- Hiring product development people to create product for the firm
- Hiring administrators to do document scanning, corporate secretarial, debtor collection, filing, etc.
- Hiring accountants to do the accounting work that does not involve client-facing meetings
Now here is the BIG one.
Businesses are being directly targeted by accounting firms (offshore or local ones who have an offshore team) offering accounting work from $8 to $25 per hour.
As a consumer of accounting services, why would I pay $200 per hour when I can get it for $20 – or less? There have to be some compelling reasons as to why I would continue paying 10 times as much!
The profession has to wake up and realize that you cannot maintain your current prices when technology is commoditizing compliance and global markets are offering lower-cost labor direct to your clients.
To hold prices you will have to add value, add value and add more value to remain relevant in the future. Accountants will have to offer valuable commentary to the data in front of them and move much more into business advisory services.
My view is that as an accountant if you are not adding value to the data that is in front of you then your days are numbered!
This is a big disruption to the labor force of accountants in Western countries. It is also a great opportunity to capitalize on.
The world is changing fast. Are you ignoring it, embracing it or hoping it will go away?
It won’t.