A new report from global consulting and research firm Everest indicates that the Finance and Accounting Outsourcing (FAO) market in 2010 is expected to resume a growth trajectory more similar to pre-recessionary levels, moving towards 20 percent and reach nearly $3.7 billion in annual contract volume (ACV). According to the Finance & Accounting Outsourcing Annual Report 2010, annual ACV growth slowed to 11 percent in 2009, as compared to 20-plus percent growth rates in 2006-2008, according to the study. The FAO market reached $3.1 billion in annual spending (ACV) last year, representing about $24 billion in total FAO spending.

Although new contract signings were lower in 2009 compared to recent years, new FAO spending continued to grow organically through a sharp pick-up in contract extensions, which represented almost 40 percent of 2009 ACV growth. About 35 percent of all currently active FAO contracts, valued at $5 billion, are up for renewal during the next three years. This cycle of renewing contracts will continue to fuel organic growth in the market as buyers increasingly focus on expanding the value they generate from FAO.

"As the global economy continues its path towards recovery, we expect to see the FAO market regain traction, driven by new deals and scope expansions, as well as more than 45 contracts up for extension this year," said Katrina Menzigian, Vice President, Research. "We foresee increased adoption across industries and geographies to continue. Beyond the United States, we expect contract signings in the domestic Asia-Pacific market as well as Rest of Europe to rise."

Other report findings include:

• FAO market growth continues to see strong adoption across manufacturing, consumer packaged goods, retail and high-tech sectors. Telecom and pharma are emerging sectors with the highest growth rates
• The financial services sector saw stronger activity than expected last year, and pent up demand will contribute to growth in 2010
• Asia Pacific started to emerge last year, capturing 35 percent of new contracts
• Adoption by the mid-market was unable to sustain momentum garnered from 2006 to 2007 primarily due to the economic climate and lack of proven, successful FAO solutions

Established leaders Accenture, ACS-Xerox, Capgemini, Genpact and IBM account for nearly 65 percent of the FAO market's ACV. Other suppliers included in the analysis include Cognizant, Compass BPO, EXL, HCL, HP, iGate, Infosys BPO, Intelenet, KPIT Cummins Infosystems, Outsource Partners International, Patni, RMS, Steria, TCS, Vengroff Williams & Associates (VWA), Wipro and WNS.

In this year's report, Everest highlighted five suppliers as 2009 FAO Market Star Performers: Genpact, IBM, Infosys, Wipro, and WNS. These suppliers demonstrated the strongest movement forward across the following two dimensions in 2009:

• Market success in 2009 based on ACV growth, number of contract signings, and value of contract signings in 2009
• Capability advancements in 2009 based on expansion of scale, scope, delivery footprint, and technology investments

The Star Performers designation relates to year-on-year performance for a given supplier and does not reflect on overall market leadership positions. Those identified as the 2009 Star Performers include both leading suppliers and major contenders.

"Last year, successful suppliers fine tuned capability mixes and positioned for anticipated growth this year," said Saurabh Gupta, Research Director. "Moving forward, successful suppliers will continue to identify and refine target buyer segments, meet client needs in terms of global delivery capacity and service, bring technology and process solutions that more closely link process operations with business outcomes, and focus on client relationship management."

You can read an extract of the Finance & Accounting Outsourcing Annual Report 2010. For additional information, e-mail info@everestresearchinstitute.com or call 214-451-3110.