FAO Research reports a widening gap in 2008 between companies that outsource finance functions and their service providers in how outsourced services are priced and measured. The analysts caution that many existing and prospective outsourcing engagements are threatened by the lack of accord between the parties.

The FAO Research study reveals several findings that point to major changes in the finance and accounting outsourcing (FAO) market in 2008, including:

• FAO buyers are more sophisticated with the outsourcing lifecycle than in years past.
• Mismatched expectations between what buyers want and what suppliers provide can and will lead to FAO contract failures.
• Buyers will demand continued process improvements, business impact and innovation to result from the management of their outsourced services.
• The most contentious parts of FAO contract discussions will center on pricing.

“CFOs have scaled the learning curve,” said Lisa Ross, CEO of FAO Research. “They are insisting that their outsourcer understand their business pains and strategic priorities. A cookie cutter approach to FAO contract pricing no longer works.”

About this study

The FAO Research 29-page report, "The Definitive Study of FAO Contract Pricing: Best Practices, Lessons Learned and Challenges for 2008" includes details about: The best (and least effective) FAO contract pricing strategies to implement; How FAO contracts handle upfront costs, charges, credits, earnbacks and terminations; How performance-linked measures are perceived and used; What the biggest FAO contract pricing challenges will be this year.

The study involved interviews with outsourcing buyers, suppliers, lawyers and consultants who deal regularly with FAO contract considerations. Buyers remain confidential. Others interviewed include executives from: EXL Service, Genpact, IBM, Infosys BPO, Om Outsource Process Systems, Satyam BPO (formerly Nipuna), Tata Consultancy Services (TCS), Wipro BPO, WNS Global Services, Alsbridge, EquaTerra, The Hackett Group, Hurwyn Group (independent advisory firm), Milbank, Pillsbury Global Sourcing, PricewaterhouseCoopers (PwC).

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