The quarterly survey, carried out with BSI Global Research Inc,
took the views of chief financial officers and managing directors
from 127 European and 151 US multinationals and found that 75% of
respondents now use outsourcing or shared services to support their
companies' financial functions.
The survey reveals that 72% of European multinationals have
outsourced financial functions over the past two years compared
with 77% in the US, and that 71% of European companies and 78% of
US companies are planning to use these services in the next 12-24
months.
Product sector companies (80%) are more focused on using these
services over the next one to two years than service companies
(63%) and, overall, 29% of US and European companies expect to
increase their use of outsourcing of financial functions - with
spending expected to be nearly 16% higher than current levels, says
PwC.
However, the survey reports a mixed response when it comes to
the effectiveness of outsourcing. Thirty-one percent of respondents
admit to finding limited or very little cost benefit in the
process, 9% feel they are breaking even and 4% believe they are
actually losing money, but say they are achieving other
benefits.
On the other hand, nearly half (47%) reported that their
companies have been saving either a moderate amount (44%) or a
great deal (3%).
"Many multinational companies that outsource financial functions
do not find it to be cost effective," said Dan DiFilippo, PwC's
Global Leader for Performance Improvement and US Leader for
Governance, Risk and Compliance.
"Companies that turn to outsourcing for cost savings should
conduct comprehensive feasibility studies to better understand
their potential return on investment. Many companies enter
outsourcing arrangements without conducting a proper cost-benefit
analysis," he warned.
Thirty-eight percent of Europeans report the benefits their
company derives from outsourcing are better than initial
expectations, 46% rate them about on par, while only 8% rate them
worse, says the survey. Twenty percent of US executives believe the
benefits are better than expected, 61% rate them on par, and 10%
consider them worse.
"US and European executives have contrasting views when it comes
to the types of financial functions they look to outsource," said
Andrea Samaja, European Performance Improvement Leader, PwC in
Italy. "Far fewer European companies outsource benefits and claims
administration than US companies."
The survey shows a marked difference in the financial functions
that these multinationals have, or are planning to outsource,
within the next 12-24 months. For example, in the US, the top two
outsourced financial functions are: payroll/billing/accounts
payable (74%) and benefits/claims administration (70%).
In Europe, however, the top two functions are: IT/systems
support (70%) and tax services (59%), with payroll/billing or
accounts payable services trailing (48%).
Overall, use of IT/systems support is higher in Europe than in
the US, as are accounting services and human resources/hiring.
European companies, however, make far less use of most other
outsourcing services, including payroll/billing/accounts payable,
benefits/claims administration, internal auditing, and risk
management.
At the same time, the European and US executives disagree on
which financial functions have reaped the greatest benefits from
outsourcing.
A majority of Europeans gave ratings of "highly effective" for
the following attributes: security/privacy; timing/timeliness;
advisory competencies; competence of outsiders; control and
compatible IT/systems support. But only 40% described cost savings
benefits as "highly effective," versus 38% "mixed," and 9% "less
than effective."
A majority of US executives rated security/privacy; control;
timing/timeliness and ability to deal with compliance issues as
"highly effective." Yet overall quality and cost-saving benefits
received predominantly mixed ratings.
