Is there a limit to outsourcing?

It’s an age-old question: how much can you outsource? What should be left well-alone? Vipul Sheth gives us his take.

What are the ‘limits’ for outsourcing and offshoring? How much can you, or should you, outsource?

The question has arisen after reading a pre-summer story in the FT about concerns by the UK audit regulator about offshore teams making ‘judgment calls’ in relation to big audits.

The article states that the FRC notes an “increasing reliance on offshore teams and raised concerns about the quality of the work those teams were able to produce”.

Outsourcing and offshoring fundamentals

For me, this story touches on the fundamentals of not only best practice in relation to the outsourcing/offshoring industry, but the standards to which accountancy firms and their in-house teams operate.

If we pare this down to the basics: well-trained people, wherever they are in the world, should be capable of doing great quality work.

However, what that looks like in practice is down to processes, technology, culture, and a high-level understanding of the risks inherent in the work undertaken.

For example, an audit firm making a judgement call on how a billion-dollar provision has been treated by a client will likely require someone at partner level to make the ultimate decision. That doesn't mean that team members further down the rung haven’t been involved in collating information upon which the decision is ultimately made – but the decision isn’t their call.

Crucially, the best-case workflow for that example would be the same whether staff involved were in some way offshore, or not. Let’s not kid ourselves of the myriad major auditor failures of the past 25 years – offshoring wasn’t the problem.

If outsourced/offshored teams can review, let’s say 10,000 invoices, and pull out three exceptions based on agreed-upon parameters, then someone up the chain makes an ultimate call on what to do with those exceptions. Perhaps if the exceptions were considered low-level, then the team could sign it off themselves.

Faith in your teams

Ultimately, it comes down to good training, great processes and transparency. Anyone reviewing work and signing off against it requires faith that they have the full picture without having had to check everything themself.

I would argue that if an offshore team isn’t trusted to do the same work as an equivalent onshore team, then something is broken.

My initial question was: what is the limit when it comes to outsourcing and offshoring? Big decisions and accountability fall onto leaders; that can’t change. Otherwise, the only other limitations come down to the quality of people, processes and technology – the sky’s the limit.

Vipul Sheth is founder and MD of Advancetrack

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