The benefits of offshore delivery centers

In times of crisis, leaders are gifted with the opportunity to lean into new ways of thinking about their business. Amidst the financial crisis, the Big Four firms outsourced routine, non-complex work to “delivery centers” in low-cost jurisdictions. The objective was primarily to improve the bottom-line by reducing costs.

Over the past decade as these kinds of delivery centers have grown and matured, the Big Four have recognized benefits beyond cost savings alone. As the world emerges from another crisis — the COVID-19 pandemic — delivery centers are an opportunity for accounting firms of all sizes to address a broad set of industry challenges and capitalize on changing macro trends.

Public health restrictions imposed on businesses and people around the world during the pandemic has changed how remote work is viewed. Prior to the pandemic, accounting firms and their clients were reluctant to consider remote work, as it was considered an inefficient, if not impossible way to operate. With the work-from-anywhere experience of the last two years, remote work is now widely accepted and viewed as a viable manner to conduct day-to-day operations.

The stigmas are now gone. LinkedIn found 83% of people in the finance sector believed that remote work and effective operations go hand in hand. A CoSo Cloud survey found 77% of professionals report better productivity when working off-site. Accounting firms have made long-term commitments to their staff and clients that work will continue to be performed remotely — a major industry shift. Remote work is no longer a concept of the future, it is an immediate and go-forward reality.

The “Great Resignation” is a macro-economic trend that has significantly impacted the accounting sector (to say nothing of the whole economy). Achievers found that more than half of employees plan to seek new employment opportunities following the pandemic (significantly higher than the pre-pandemic rate of under 20% reported by the Society for Human Resource Management ). This, coupled with an increase in demand for accounting firm services, and the requirement for professionals to perform that work, has created an extremely competitive environment for U.S. accounting firms of all sizes looking for staff.

Access to talent is a significant challenge facing all sizes of firms. This challenge can be mitigated by the adoption of a delivery center model that utilizes skilled, experienced accountants from non-U.S. markets where the human resource pool is vastly larger and less competitive.

The benefits of a delivery center

Delivery centers are typically located in low-cost jurisdictions where there is an abundance of well-educated, English-speaking accounting professionals and para-professionals. Initially, firms establish delivery centers to take advantage of the low cost of labor, real estate and other infrastructure, thus improving the bottom-line by cost reduction.

As a delivery center matures, the model offers more benefits than cost savings alone. Innovative firms are tapping into a stream of benefits, including:

• Gain access to staff who can be available around the clock.
• Improved quality of work through standardization, centralization and specialization.
• Positive impact on morale and retention of home-office staff, who are freed up to perform higher level activities.
• Centralization allows for smooth deployment of training and technologies.
• Increased client satisfaction on more than just the cost dimension as prepared-by-client documents can be examined in almost real-time 

In my experience, innovative accounting firms that adopt a delivery center model create a distinct competitive advantage.
How delivery centers are organized

Delivery centers are typically structured to perform work in two ways: by team extension or with specialized teams. 

With team extension, the delivery center team conducts work on the engagement as other team members would in a traditional manner, just from a remote location and often at a different time of day.

Clients are now familiar with providing supporting documents electronically, and technology portals allow this information to be transferred to engagement team members in remote locations seamlessly. Video conferencing allows team members to communicate with off-shore team members ensuring information is shared and coaching and mentoring occurs. 

One myth that needs to be debunked is the idea that team extension cannot be utilized by smaller firms. Even sole practitioners with no on-shore staff can use this model with one or more offshore team members. Firm size no longer determines success in implementing a delivery center model.

Specialized teams change the traditional manner that engagements are performed. In this model, delivery center team members specialize in conducting one or a few procedures. They do those procedures every day for multiple engagements. By centralizing the performance of specialized tasks at a delivery center, firms realize efficiencies.

In large firms, it is common for a team to consist of approximately 10 people focusing on, for example, performing the cash section of an audit engagement. The team composition includes three accountants that have their accounting designation, and seven para-professional accountants.

Think again if you believe this model is only reserved for large firms. Smaller delivery centers can be designed to use specialization as well. Instead of having teams of 10 members, there can be individuals or smaller teams focused on specific procedures that are supervised by professionally designated accountants. Small firms can also partner with other small firms and create specialized teams that they both share, making this partnered delivery model accessible to all sizes of firms.

Delivery centers are a significant opportunity that accounting firms of all sizes should be evaluating to take advantage of the shift in attitudes towards remote work and address challenges the profession is facing — access to staff, audit quality, business transformation, etc. While they are currently the domain of the savviest and most innovative firms, five years from now, delivery centers will be the norm.