Cloud Is Risky But Safer Than Offshoring, CFOs Say

Chief financial officers may be wary of the risks that cloud computing initiatives hold but they see offshoring their financial processes as being more dangerous.

Research by Ovum found that 29 percent of CFOs in the UK and US viewed cloud as “posing an unacceptable risk” for finance and accounting systems, but 38 percent expressed similarly strong concerns over outsourcing to India. Even more (44 percent) were troubled by the thought of a move to South and Central American countries.

Popular India Is Least Satisfactory

India proved to be an interesting region for financial offshoring. Although it proved to be the most popular country for those who have already taken the plunge, it also rated as the lowest for satisfaction. On a scale of one to four, Asia-Pacific came top (3.78), the UK was down the list at second bottom (3.61), but India was a distant last with only 3.08.

“The fact that India received the lowest satisfaction ratings of any region, and by some distance, indicates there is a very real trade-off in terms of satisfaction versus cost. India is known to produce some of the lowest-priced accounting staff in the world but it would seem that, in many instances, vendors are cutting corners as well as costs,” commented Peter Ryan, Ovum lead analyst.

One of the main obstacles to an offshore move was loyalty felt towards existing staff. This was stated as the case by 44 percent of the CFOs.

“We don’t know if this is due to a sense of responsibility for their staff,” Ryan said, “or a desire to keep their skills – but it is likely to be a combination of the two. Concerns over losing control, which is traditionally seen as the biggest barrier, was pushed into joint second place with the worry that it would not save enough money to be worthwhile (31 percent).”

The CFOs were also sceptical that outsourcing within their own country would prove worthwhile. This was contrasted by the feeling expressed by those who already outsource. This group felt that processes had become more efficient than in-house operations. On a rising scale of satisfaction from one to four, the average rating for outsourced processes was 3.28, compared to 3.22 for in-house operations.

The lure of a 20 percent cost reduction still would not tempt the resistant CFOs to move operations offshore, but the more adventurous outsourcing group could be lured to switch suppliers for a reduction of just 15 percent.