Will offshoring affect UK accountants?

Virtually any knowledge work that can be carried out remotely, is geographically independent and distributable through a modem can be outsourced. [2]
There is now no effective distance between any two locations worldwide. Communications systems are so advanced that they are becoming useful in conducting more and more complex business procedures; casting a threatening shadow over the professional services of the developed world.

“A few years back outsourcing accounts work involved shipping over boxes of records and accounts with the very real possibility of them getting lost in transit. [1]
This is no longer a legitimate concern; technological evolution is a main facilitator of the offshoring phenomenon. Documents can be digitalized by scanners and then transported anywhere to be further scrutinised any number of collaborators. The communication network integral to the system is also perpetually becoming every cheaper and faster, creating a virtual presence where absolute proximity is not called for.
India is becoming a favoured destination for many UK firms toying with the concept. Its benefits include a highly educated workforce, average salaries at a tenth of the UK, widely-spoken English and an Anglo-centric culture. [2] Even the disparity in time between these two locations has been utilized. India functions approximately 5.5 hours ahead of the UK. This can be made favourable; if an urgent case arises it can be first dealt with by the Indian depot and if at the end of their day the work remains uncompleted the 2.5 hour overlap allows time to brief the staff in the UK so that the flow of work can be almost continuous, moving towards the provision of a 24hour service.

The offshoring notion is applicable to varying degrees within the range of Accountancy services. It is said to be more suited to repetitive and highly structures work – the tedium. Subjects such as tax and preparing financial statements can in this modern age be easily shipped from domestic soil. In fact it appears that many of the new location appear better equipped to tackle tasks at offer, JSA’s primary reason for moving part of its back office operation to Mumbai was because “even if we could find the quantity and quality of staff we needed in our home town of Watford we were unable to retain them long enough for them to become effective because of the routine nature of the work required.” [3]




The graph above displays the recent volume of US Tax returns completed in India, the exponential growth shown in the 3 years of empiric data has been linearly traced in 2009. On the face of it the trend depicts a worrying outlook for the future requisite of US and UK practitioners.

However this concern is qualified as Middleton believes that “the depth of the accountant-client relationship means the vast bulk of accountants' work is here to stay. If I look around our business and ask what kind of tasks might go to Bangalore, for example, the answer is probably not a great deal. A lot of what we do requires proximity to clients.” [2]

Instead of a threat to UK accountancy, many benefits may be realized through the changes. “Research by Cranfield School of Management has shown that outsourcing not only reduces measurable costs, but also heavily cuts indirect costs.” [3] Through streamlining the service provision enables the company to more effectively and efficiently direct the full attention of its available resources at the value adding services.
The role of the Accountant, in the UK at least, is evolving to encompass a more strategic and specialised approach, “helping their clients grow their businesses instead of just dealing with the often monotonous compliance work.” [3]

On global terms it appears that offshoring may be a good thing for everyone, helping to develop the economies of less fortunate regions of the world, whilst allowing UK firms to tailor their services towards the more rewarding aspects of the profession, presumably resulting in a cheaper and more comprehensive product for the client.
Whilst it is predominantly good that emerges from the process of offshoring; in order to retain the equilibrium; UK redundancies in the labour intensive, number crunching function are inevitable. To further illustrate the point the Abbey bank has plans to replace Four hundred of its UK positions with Indian equivalents. It is these factors which may cap the colossal growth recently evidenced. Political backlash is a major concern for multinationals. They maintain a fragile interdependency with national government and in many cases would be reluctant to upset this balance. The benefits will have to be substantial to embrace the risk, a risk which may deter many companies completely from embarking on an offshoring proposal; ensuring that a certain degree of the pure accountancy function is conducted domestically.


References;
[1] Special Reports: Outsourcing - Don't get left behind Michelle Perry. Accountancy. 2004
[2] Analysis: Offshoring - Offshore Accounting; Liz Loxton. Accountancy. 2004
[3] Analysis: Outsourcing - The Indian solution, Victor Stanton. Accountancy. 2006