At Summit 2021, our Advisory track featured a panel where three Allinial Global member firms shared their insights and experiences with finding talent offshore. Attendees heard from BPM, The Pun Group, and Reynolds, Bone & Griesbeck (RBG), who addressed common concerns about the shift to outsourcing and provided an inside look at the ways their firms had leveraged offshore talent to achieve specific goals.
Think Differently
As our panelists shared in the session, offshore talent can help firms solve a variety of challenges. When Jim Wallace became CEO of BPM, he talked with all the partners and found that the biggest challenge they were facing was lack of capacity. Without excess capacity, he knew that BPM would struggle to drive the ambitious growth it wanted to achieve in coming years.
Kenneth Pun, Managing Partner of The Pun Group, was having a hard time finding audit seniors to support his firm’s growth in its auditing practice. And Skeet Haag, Managing Partner at RBG, was seeking help for tax preparation and occasionally for certain audit functions.
How Allinial Global Firms Are Leveraging Outsourcing
RBG is using staff from Xpitax, which has worked nicely for them. Everything is facilitated by XCM for workflow, and work done by Xpitax staff receives a detailed review by an in-house tax reviewer. This approach has helped RBG increase margin and ease staff workloads and recruiting needs.
In 2021 RBG sent 6% of returns (totaling over a hundred returns) to outsourced staff. However, that helped them offload 800 hours of work from internal staff, easing the busy season. Next year, RBG hopes to increase the percentage to 12% (225–250 returns). Skeet shared that this was partly so the firm had time to learn how to best work with the outsourced team.
The Pun Group is using an outsourcing firm based in South Africa, and Pun is able to review resumes before staff is assigned to his company. Some of the candidates sourced this way have previously worked for a Big Four firm, which has reduced Pun’s need to train the outsourced staff.
Pun’s team works directly with two outsourced staff, who also are supervised by an audit manager that helps to manage the work the staff are doing. This approach has been so successful that Pun is planning to increase outsourced staffing for next year, as he is anticipating additional growth for his firm.
Building Your Own Offshore Office
BPM opened an office in Bengaluru that offers services ranging from entry-level all the way up to senior managers, in audit, tax, and client accounting. BPM does not use the term “outsourcing,” instead considering the Bengaluru team to be BPM employees. Contrary to some perceptions that outsourced staff is there to do the work and go home, Jim has found that BPM’s Bengaluru team is very dedicated to the firm. In fact, BPM is exploring ways to create a partner or partner-equivalent track for offshore staff.
In addition to offshore staff, BPM is also using vendors in the Philippines and secondments in South Africa. They are a great example of how firms can use a mix of strategies for staff sourcing.
Concerns with Outsourcing
Attendees in the session raised several possible concerns about outsourcing, and panelists shared how their firms had addressed these concerns in their experiences with offshore talent.
- Disclosure to clients. How will clients respond to the firm’s decision to outsource? Panelists shared that their partners were probably more worried about disclosure issues than actual clients. Overall, very little pushback was experienced with clients. For tax, however, ensuring that you obtain the 7216 disclosure consent from the client is important.
- Development of in-house staff. With work being moved offshore, how do we develop our in-house staff? There are several possible approaches. One is to consider the offshore staff part of the team, which can ensure that in-house staff still gains exposure in all areas. Another option is to outsource only lower-level work so that in-house staff can still see the big picture of the engagements. You can also leverage outsourcing as a means to free up time for in-house staff to devote to development.
- Acceptance by firm leadership. What if some of your partners push back on the idea of outsourcing? Panelists saw pushback as part of the change management process. Although the concerns being raised are often “delay tactics” that can be addressed through change management techniques, it’s important to be willing to listen and adjust the way you are working if you want to optimize your firm’s use of offshore talent.
What about Pricing?
Outsourcing provides some great cost savings on staff. For example, Jim said that India’s staff cost is about 15% of what BPM would normally pay for US staff. This can help to increase margin, but it can also have a potentially negative impact on top-line revenues if viewed as part of a cost pass-through to the client. Jim suggested that firms should make sure not to switch margin dollars for margin percentage. This is a particular risk for firms that are billing hourly.
RBG is in the process of adopting Advanced Pricing Methods® where most services are provided based on a fixed fee, which has helped them increase the margin on their work. They are also focusing on “client upgrading” to eliminate less profitable clients or those who are not aligned with the firm’s strategy.
Outsourcing Is Here to Stay
As Allinial Global President and CEO Mark Koziel said during the session, outsourcing is here to stay. Technology and automation can only take us so far, so firms need to figure out a staffing strategy that works for them.
Outsourcing can be key to offsetting recruiting challenges, but even more importantly, it provides the staff and capacity that are essential for firms that plan to grow. As our panelists shared in this session, there are many ways to incorporate offshore talent to help your firm increase profitability, reduce turnover, and enable growth.
