Offshore to India for independent CPA firms

By Jagrit Gupta | 6 min read

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Shared Services Centre

Part 1: Offshoring to India - Genisis & Rationale

The world has moved towards a shared economy leveraging technology and remote working capabilities. The COVID Pandemic has been debilitating for business, but this is the time to rethink and reorganize to plan for resilience, competitiveness, and profitability.

About SPC Group India :

Operating for over 70 years, SPC Group is a technology-focused accounting and advisory firm. Consistently ranked amongst the top Accounting firms in India, SPC is an Indian member form of PrimeGlobal- An award-winning association of independent accounting firms, comprised of approximately 300 highly successful independent public accounting firms in over 90 countries.

A. Off-shoring to India: Genesis and Business Rationale

Outsourcing of services to India started in the 1980s and rapidly accelerated in the ’90s. Initially, global airlines began outsourcing their back-office work to India and eventually IT companies followed. Some of the earliest players in the Indian outsourcing market were Texas Instruments, American Express, Swissair, British Airways and GE, who started captive units in India; today world’s largest companies have back-offices in India including McKinsey, Honeywell, Tesco, JP Morgan, Deloitte, PwC, KPMG etc.

It is pertinent to note that companies often overlook the additional benefit of generating higher customer retention rates with a combination of innovative practices, intelligent and talented subject matter experts, and speedy execution.

B. India’s History & Attractiveness as a preferred offshore Destination:

A brief history of Indian business service providers demonstrates that the nation has progressed from data processing and data entry services to high value consulting, development, testing, virtualization and other convergent services.

Today, India dominates the global outsourcing market with a 67% share; valued at more than $150-billion, having a growth rate of 10-15% per year; has now become a support system for most of the software companies in the west. Over the last 30 years, India has put itself on the international business map by offering and scaling low-cost, low-end IT services to global enterprises.

As per the A.T. Kearney’s 2019 Global Services Location Index – India is ranked one in terms of attractiveness for outsourcing. There are over 500 companies in India that are catering to the varying requirements of the western countries.

  • Human Capital: India has the 2nd largest – over 350 million, English-speaking people in the world, and ranks 3rd in Asia on English proficiency.

The engagement execution cost in India is 30-40% lower as compared to the US and Europe. While the blended average hourly cost of CPA professionals in India ranges from $20 – $40/hour, in comparison the cost in US comes $60 – $150/hour.

  • Time-Zone Difference: India gives an option of 24 hour client service due to the 12-hour time difference between India and the USA providing companies with opportunities for engagements to be delivered with 40% faster turnaround time (TAT) leading to greater efficiency, increased productivity, and more time to focus on other crucial tasks.
  • Data Security & Privacy: India takes data security very seriously and the Data Protection Bill, 2019 was introduced by the Minister of Electronics and Information Technology in December 2019; Information Technology Act (2000) (“IT Act”) to include Section 43A and Section 72A, which give a right to compensation for improper disclosure of personal information.

C. CPA firms taking a leaf from the IT playbook for disruption

The IT industry may have possibly benefited half a Trillion USD in cost savings through the offshore model. The remote working culture and technology facilitation promulgated by the COVID Pandemic has catapulted forward thinking organizations to evaluate an offshore Service Delivery Model. In the pre-COVID era many CPA firms may have believed that:

  • Teams must be put under the same roof as the camaraderie and the sharing of ideas that can take place within the same environment cannot be done when the teams are oceans apart.
  • Corporate and cultural fitment are a necessity for an organization to grow
  • Face to Face communication is easier with than through virtual channels.

But all the above has drastically changed now – The COVID pandemic realization has sunk on many CPA firms and unlocked potential of remote working capabilities.

Since the last 5 years CPA firms have consciously been making efforts to increase their revenue share in areas of Advisory, Technology solutions, and Consulting – leading to shrinkage of focus traditional practices like accounting, tax, and auditing. By contracting out testing, research and data entry work to an offshore centre with demonstrated expertise in US GAAP & IFRS for Accounting, US Tax Returns and Transfer Pricing, SOX Compliance and SOC for Cybersecurity, CPA firm’s focus can be redirected to emerging practice areas and facilitate growth in size and operations.

Further, time consuming tasks such as sanitation of raw data in excel, PowerPoint presentations, data entry, checklist-based testing, Transfer Pricing comparatives etc. can effectively and efficiently be managed externally with no extra risk to the business. In doing so, companies can turn fixed costs into variable ones whilst simultaneously reducing the burden of managing, maintaining, and extending benefits to a large workforce. Additionally, outsourced services provide a certain amount of flexibility in slow periods and economic downturns.

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