Since the 1980s, Western companies have looked to “offshore” teams in international markets as a source of labour for core business tasks like cost accounting.
Today, the offshore accounting industry has reached new heights — but it’s going through significant changes, experts say, that will change the calculus for international businesses.
“If you say outsourcing in 1990 was in the Stone Age, we are probably in the supersonic age now,” said Arun Ravindranathan, FCMA, CGMA, founder of The dot HQ, a UK company that offers proprietary technology and helps accounting firms and other businesses hire offshore employees.
The accounting profession has grown by leaps and bounds in regions from Eastern Europe to Southeast Asia, with growing numbers of talented and experienced employees. But demand for those workers is growing even faster, leading to rising wages and an ever-accelerating race for talent.
At the same time, technology is reshaping the landscape. Remote work has allowed for new international strategies, but automation threatens to take over some of the work that has been assigned to these teams. Put together, it has created a distinct new set of questions and challenges for anyone looking to develop an offshore presence.
There is “a massive change because of technology and acceptance of offshoring, combined with staff skill shortages [in the West]”, Ravindranathan said.
To keep up with the fast-changing international talent market, companies are raising wages, broadening their recruitment efforts to new areas, creating new career paths for international hires, and improving engagement with those workers. Here are four imperatives for finance leaders to achieve success in this area.
Be prepared for the offshore talent war
In many markets, workers are snapped up quickly as companies continue to invest and hire.
Bahrain-based Sandeep Wadekar, ACMA, CGMA, who is finance manager (Reconciliations and Investigations) at BFC Group Holdings, has seen the workforce trends firsthand. He was hired in 2008 by the international consultancy Radius to lead a new team offshore. At the time, the company was shifting jobs from Bristol in the UK to India and Singapore.
He became the company’s first employee on the new Indiabased team. As he planned the new office more than a decade ago, Wadekar knew he would have much to teach his new hires.
“Frankly speaking, they did not have the international exposure as such,” he said. The bulk of job candidates at the time were largely from traditional finance backgrounds, leaving them unfamiliar with the demands of international clients.
Fifteen years later, it’s a far different story in India and many other markets. Job candidates in these countries have grown more qualified and more knowledgeable about international accounting, especially as universities have adapted to the demands of international business.
That has made it easier to train new employees, Wadekar said.
“It is very, very developed compared to when I started,” he said, adding: “Now, the cost at which they will come has increased significantly. Retaining them is a new challenge.”
Staffing firms and companies need to put a new focus on retention, Wadekar warned. “You have invested the time in them, and, if they leave, your investment has gone in vain.”
Use remote work to broaden the search for workers
As they search for new hires, though, some companies are reaching into new parts of offshore markets. That’s the case in Bulgaria, where Tony McMurray, FCMA, CGMA, is managing director for Ingram Micro in Bulgaria.
The global information technology company has grown its presence in Bulgaria to about 1,200 people over the past decade, part of a larger influx of tens of thousands of shared services jobs to the former Soviet satellite state.
“In the last ten years, we’ve seen a real pickup,” McMurray said. But unlike in many other markets, Bulgaria’s shared services employers are also fighting a demographic trend: The nation’s population has declined sharply in the last ten years, due in part to out-migration.
“The paddling pool [of candidates] is getting slightly smaller, and we are competing against each other,” McMurray said of the various international companies with operations there (see the sidebar “Case Study: Ingram Micro in Bulgaria”).
Ingram Micro has found a partial solution by further embracing remote work policies and technology, which has allowed it to recruit new hires from smaller cities who weren’t familiar with shared services work, he added.
Even amid the population decline, “hybrid work has allowed us to gain access to parts of the country we didn’t have access to before”, McMurray said.
Tess Boland, a US-based partner at KPMG, reported that similar strategies were expanding the firm’s talent base in the various markets where it operates.
“Many of the individuals left … larger cities and went home [during the pandemic lockdowns],” Boland said. “Now, we’re looking to expand more satellite locations and attract talent.”
That strategy and others have helped bring retention rates back to near pre-pandemic norms, she said.
Use development opportunities to engage staff
Wages and remote work alone won’t solve the talent crunch in offshore markets. The companies that fare best are paying close attention to the wants and needs of their employees in developing markets, Boland said.
“[Offshore employees] need to be involved in setting our goals and objectives,” she said. Firms and companies should also create opportunities for these employees to progress beyond rote and basic assignments.
“It’s really important to have a career progression for individuals throughout the firm,” Boland said. “People aren’t motivated unless they can see the line of sight to that next opportunity.”
That rings true for Tharindu Weerasinghe, ACMA, CGMA, a Sri Lanka-based assistant director at Acuity Knowledge Partners, who provides analysis and other services for a UK-based hedge fund from an office outside Colombo, Sri Lanka. Acuity has more than 500 clients across different geographies and businesses including investment banking, asset management, fund management, and hedge funds. It has teams across India, Sri Lanka, the US, the UK, Costa Rica, and China, which gives local employees experience in working with cross-border multicultural teams.
Companies like Acuity are appealing for potential hires because they offer a new career path — in a country that has “very traditional finance and accounting roles right now”, Weerasinghe said. With the scale and growth of Acuity, “a lot of individuals can progress in their careers to become managers and leaders”, he added. “[These companies] give a very unique opportunity for the local talent.”
Maximising that potential often means having a dedicated local staff in the market and learning the culture of a place.
“They always take time to understand you, understand your culture, background,” Weerasinghe said of successful managers from abroad. “That’s very helpful, if you can put that time in first, to make sure that people are comfortable with the work environment.”
Wadekar said that offshore employees want to receive the same respect and acknowledgment as others in the company.
Remote work technology has also changed the relationship. In earlier years, offshore work involved shipping crates of documents for processing in India and elsewhere. Today, those same offices are connected by video calls and cloud systems. That has allowed for much greater engagement — crucial for making the most of an offshore team.
But all the digital connections in the world can’t make up for the power of an in-person meeting, McMurray said.
“All my best partnerships are with people who come and visit us,” he said. “The ones who involve my team in their leadership meetings, the ones who see my team as part of their team are the ones who work best with us.”
“The relationship is a lot closer,” Ravindranathan said. “Treat the offshore workers like an extension of your team.”
He also suggested that staff can rotate periodically through markets, if possible, to build international rapport.
Prepare for an automated future
Despite years of heady growth, questions are looming in offshore markets. With wage demands rising, some companies are considering returning operations to their home countries, McMurray said.
At the same time, automation efforts are targeting some of the basic accounting activities that are the focus of outsourcing and offshoring.
“The whole idea of automation gets [some employees] a bit frightened,” he said. “They’re nervous they could lose their jobs.”
But McMurray sees an opportunity rather than a threat. Their position on the front lines of automation could be a valuable experience for shared service centres, he said.
Shared service centres already are masters of efficiency; if they are successful in automation, they could reposition themselves as technological experts who can facilitate changes in the rest of the company, McMurray argued.
In other words, offshore teams could move beyond the expectation that they will take on only the basic work of accounting and, instead, use the growing talent base in these markets to take on the dynamic issues that are reshaping the profession.
“We actually could become consultants,” he said.
Clients are now expecting more regular updates and more responsiveness, Ravindranathan said. Tax digitalisation efforts by the UK government and continental European governments also are increasing the demand for services.
Ravindranathan sees automation as an adjustment, not an existential threat, for offshore accounting. “If anything, automation has actually resulted in more work,” he said.
Offshore markets are undeniably evolving. The change is driven by the same forces at play in Western markets, from automation to competitive labour markets. That has driven up costs and, to an extent, challenged their appeal as sources of lower costs. Yet many are seeing continuing investment and development from abroad — and leaders on both sides of the borders are planning for what’s next.
Case study: Ingram Micro in Bulgaria
In 2012, Tony McMurray, FCMA, CGMA, was finance director of Ingram Micro UK when the company made a big change. With McMurray’s approval, half of the company’s finance jobs were moved to Sofia, the capital of Bulgaria.
“In those early days, it was a few hundred people,” McMurray said. For a few years, McMurray himself remained in the UK, but he built a close relationship with the new office in Eastern Europe.
Then, in 2018, the company’s leadership asked McMurray if he would move to Bulgaria and head the growing team. In search of a new challenge, he accepted.
Today, the team stands at about 1,200 people. “It’s grown as we’ve matured, but we haven’t grown too quickly,” McMurray said. About half of the office works on finance functions, and the rest work on tasks such as sales ordering and customer service.
The work has included the traditional, transactional work of shared service centres, such as processing invoices. But McMurray also has tried to harmonise and automate processes “so that we can free up our very educated workforce” for work that adds value for the company, he said.
It’s a mistake, McMurray said, to see offshore markets merely as a place to lower costs through labour arbitrage. Instead, he urged other leaders to look for the advantages of these offices. For example, Ingram’s Bulgaria team can provide services in nine languages, with many individuals speaking three or four languages themselves.
He said: “I often say to my counterparts in America, ‘A … qualified accountant [in the US] shouldn’t be any different to a … qualified accountant here in Bulgaria.’”
Andrew Kenney is a freelance writer based in the US. To comment on this article or to suggest an idea for another article, contact Oliver Rowe at Oliver.Rowe@aicpa-cima.com.
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Articles
“How to Reward (and Retain) Your Top Performers”, FM magazine, 11 August 2022
“Finance Transformation: How Exactly Do You Start?”, FM magazine, 4 January 2021
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