A very happy CA day to all the members and students of this noble profession. Today I am going to discuss about the much growing industry in India which is related to the concept of ‘Outsourcing’ and more specifically, I will discuss about the emergence of accounting firms in India.
Meaning of Offshore Accounting Firms:
In Indian context, accounting firms are basically the Indian Chartered Accountancy practice model under which the functions of accounting, auditing, taxation and their related litigations are performed. This model consists of traditional and modern practice where traditional practice refers to the firms which are handling all/mixed type of work and the modern practice refers to the firms which are handling only specialized work such as litigations in income tax, business development consultancy, mergers & acquisitions etc.
So, the above-mentioned paragraph is describing an On-Shore model which clearly means that Indian CAs are doing work as per the Indian laws.
On the other side, Offshore model is entirely an opposite concept which means Indian CAs handle accounting & auditing work of foreign entities. Typically, it is a kind of an employment in MNCs or offshore models Big4s and other international firms who outsource the work of their global entities located in foreign from the Indian offices. This whole concept is known as Knowledge Process Outsourcing (KPO).
Difference Between KPO & BPO:
As per the older concept, Business Process Outsourcing (BPO) is an overall framework in which similar and repetitive jobs are performed for a business which usually remains rigid in nature. India is a hub of BPOs and the KPOs were considered as a part of it.
But now due to the globalization, emerging growth in the businesses and excessive demand of professionals, KPO has gained a separate identity. The thing that makes a KPO different from BPO is the professionals giving expert level services to foreign entities.
Earlier, the KPOs were also engaged in doing routine jobs but as India is progressing in terms of creating professionals such as Chartered Accountants, MBAs and even the foreign qualification professionals such as CPAs, ACCAs, CMAs etc., the demand of these professionals are increasing day by day and it is not only the demand which is increasing but also the expectations from these professionals are very high in terms of accuracy and performing dynamic work .
The following statement validates the above point:
“The KPO industry’s staff qualifications and skill-set requirements are significantly different from those of the BPO industry. This requires KPO providers to develop specialized recruitment and retention strategies.”
-KPMG Research 2007
And the following statement describes how the role of these professionals is shifting from handling basic routine work to impactful work:
“Finance and Accounting (F&A) outsourcing is emerging as one of the fastest growing BPO segments. The most common F&A processes that are outsourced are transactional in nature such as accounts payable, accounts receivable and payroll. However, with a change in customer requirements, offshore centers have begun to manage almost the entire business process – including areas such as budgeting, forecasting, treasury and risk management – traditionally perceived as “core functions” to the organization.”
-PricewaterhouseCoopers (PwC) in Global Integration through Knowledge Process Offshoring 2005
After the IT companies, the big accounting firms/companies predicted this development in the very earlier stage and that prediction also became one of the reasons of their tremendous growth. India is the major revenue contributor to the global accounting units of these firms. The annual turnover of these KPOs is more than 500 crores per year per company.
Started from basic accounting work, now these firms are providing services ranging from business transformation to advisory. This is how they expanded.
As per the economic survey of 2014, India’s share in global offshore revenue is around 55% which of course includes all the professions, but we can imagine how India is contributing to global offshore revenue.
What makes Chartered Accountants special in this field?
As per Industry skill base estimate for 2014, Out of the total workforce in offshore models, only 5% are finance specialists which consists of CAs and MBAs. So, it means the workforce of CAs (as of 2014) was even less than 5%. Now, the more systematic and efficient working of offshore companies, more compensation and the difficulties in establishing practice attracted young CAs towards this model and slowly it has become a part of their dream jobs to land in.
Apart from this, many CAs has started working for international clients in their practice which includes more of booking keeping work. It is a kind of small KPO setup. Also, so many CAs started KPOs as a startup and giving employment to hundreds of graduates including CAs. They started from bookkeeping and now giving taxation and business transformational services as well.
Current Situation:
As per the recent survey, there are more than 2 Lakh knowledge professionals like CAs, doctors, lawyers, engineers working in this industry. The growth rate of KPO sector in India is more than 45 percent which is almost double to the growth in the BPO industry.
“India is all set to capture 70 percent of the $17-billion global KPO market, translating to a market size of $12 billion. For global corporations looking to move their higher-end research like accounting, IP research, equity research, market research, analytical services, engineering design, legal services, remote education and publishing, India is one of the preferred destinations.”
-Sagacious Research
Why India?
It’s an obvious question in everyone’s mind that why these companies are approaching India?
Let us discuss in detail:
Qualified Professionals: Indian Chartered Accountants & other finance professionals undergoes rigorous training & examination process which makes them stars in a dark sky. The past trends proved that these professionals are reliable enough to handle expert level work.
English: As per the survey conducted by world population review India is now the largest english speaking country in the world which makes it different from others. It makes the companies to identify the right people easily as merely the understanding of this language makes the halfway possible.
Dearth of knowledge professionals & cost factor: Yes, you read it right, the world needs more finance professionals and India is one of the demands satisfying country. The USA, UK & various other countries are facing the problem of scarcity of finance professionals and these countries are the major supplier of work. Their professionals are not enough to handle all the work and therefore, the doors to the outsourcing opens and further, they choose India because of the least cost factor as India is far behind in terms of economic growth as compared to these countries and therefore the cost of hiring a professional in India is less as compared to their own countries and the best part is these professionals still comes under the highly paid professionals in India.
Government Support: Indian government is supporting these companies by offering them various schemes such as tax subsidy, setting up of economic zones etc. The reason behind this support is much obvious. These companies come with lot of employment opportunities for the professionals which ultimately lessens the burden of the govt.
Excellent project management skills: This is one of the ideal reasons behind the growth of this industry. We can curse the educational system of India but still at various points, it has proved that being the toughest, it makes the best professionals those can face the challenging situations. The project management is a skill for the tough people and CAs can master it well.
Conclusion:
The increase of finance professionals in India is leading towards the growth of KPO sector and the data forecasts reveals that India will continue to be the most favorite place for the MNCs. The growth of this sector will undoubtedly help India to fight with unemployment problems to some extent and on the other hand it will also leads towards the development of professionals.
Disclaimer: The above article depicts the personal views of the author. It is in no way reflects the views of his employer organization or any other person. Further, the article must be treated for informational purposes only. Author is not responsible for any kind of damage in case of its use as a professional advice.
For any queries in the above article, the author can be contacted at atulkhurana@icai.org or 9888855340 (WhatsApp only).
Author Bio
There is nothing called ” CHARTERED ACCOUNTANCY”. You can have COST ACCOUNTANCY, MANAGEMENT ACCOUNTANCY and even for that sake, CHARTERED ACCOUNTANTS. So please avoid using “CHARTERED ACCOUNTANCY” hereafter.
When the author says “The past trends proved that these professionals are reliable enough to handle expert level work”, I fully agree. The English speaking matured professionals in India are capable of understanding, interpreting the complex requirements of the client companies, wherever they are situated and render high quality service.
I am aware of several professionals involved in tax accounting, audit and compliance related professional work for top audit and accounting firms in the US region.