• Accountapocalypse: Let’s Talk About Offshoring

    By | July 30, 2015

    I’ve touched on offshoring in a couple of my previous articles, and it seems to have gotten some attention. While offshoring is prevalent in top firms it's not standard practice in the rest of the profession, it has certainly been gaining momentum. I fully expect this trend to continue, and here’s why:

    Barriers to offshoring are falling:

    • Technology — Twenty years ago a firm shelled out for expensive software and server infrastructure in order to offshore processes. Cloud technology abolishes many of these barriers and streamlined the whole process. We’re no longer scanning in workpaper files, we’re reviewing them online with evidence pinned to the file.
    • HR –Twenty years ago a firm needed people on the ground to source and train staff while navigating their way through local industrial relations law. Nowadays, a number of agencies have emerged in locations such as India, Vietnam and Philippines. These agencies provide recruitment, training and payroll services for an offshore workforce.
    • Facilities — Signing up for a five year lease in a foreign country was a huge risk for many small firms. The aforementioned agencies now provide “seat leasing” solutions renting desks rather than whole offices. This enables smaller firms to scale up offshore operations without committing to a large fixed cost.

    Despite these barriers falling, there are still a few things impeding the mass adoption of offshoring in the accounting profession.

    • Cultural — The most obvious barrier to offshoring is cross cultural dynamics. Each culture has its own nuances which can lead to miscommunication and frustration on both parts.
    • Regulatory — While regulatory bodies have provided some guidance to firms, the regulatory environment remains uncertain and it’s enough to keep more conservative firms onshore. One leak of a firm’s client list (including social security numbers) is all it will take for regulators to reign in all offshore operations.
    • Security — With that doomsday scenario in mind, security is the elephant in the room! The combination of cloud technology paired with foreign staff who may not have direct oversight from the head office should be cause for concern for all firms. Adequate security and control measures need to be installed, and I suspect that firms will need to invest quite heavily in this area in the future.

    So is your job going to be offshored? Probably, if it’s not automated first. The real question is, “When?” I have no idea.

     

    • BasisPoints

      I’ve said it before, I’ll say it again – the ideal exit op, if you want job security, is commercial plumbing

      • Scharfinator

        It’s smart as an exit strategy or to just diversify yourself as a person. Trade skills are super important, now that everyone thinks college is a requirement.

    • IndenturedServant

      This guy has obviously never reviewed a workpaper that came directly from india

      • Tax Nerd

        Definitely not.

        And he left out a couple things. 1. Time zones. Dealing with someone with a schedule 14.5 hours ahead of you is a pain in the ass. Trying to arrange a phone call means someone is working very late or very early, and not really in the mood.

        2. Having to do everything through email sucks. You email them what you want, giving extremely detailed instructions that take a lot of time to write up to try and pre-empt questions. The next morning, you get questions, some of which were addressed in your original email, but you respond. The following day, you get an email that they’re busy or it’s a holiday or whatever, but your stuff will take another day or two. About five days after you asked for it (if you are extremely lucky), you get a somewhat shoddy workproduct. If you haven’t completely given up at this point, you write detailed review notes and hope that they learn from them. You may or may not get an improved version a week or two later. No matter how frustrated you are, you have to be extremely nice, because emails that are too harsh go into the ether.

        It’s not like your firm is buying anyone a plane ticket, so really you’re just names on emails, at best.

    • N.E.R.D.

      I’m hoping for automation. I think it’s the more natural development (for tax, anyways). The workpaper software I’m using allows me to port over my workpapers directly into the tax software by only adding a few coding prep steps (imperfect port right now, but it’s better than nothing). Both firms I’ve been at use software with this technology capabilities (large national and boutique), but the partners were/are adamantly resistant to adopting it because of the set-up time and the realization hit they’ll have to eat.

      • taxintern

        are you talking about OTP? importing workpapers into a system means nothing. it’s getting to the numbers on the workpapers that takes time, imports have been around forever.

        • N.E.R.D.

          I’m not sure what OTP is an acronym for, but I’m pretty sure we’re thinking the same thing.

          I agree. Getting workpapers set up right is the real time consuming part. I don’t see how this can be automated, as somebody still needs to make judgement calls.

          My point was that even these imports are not being utilized and they have been around forever because, in my experiences so far, nobody wants to take the time to learn them as a department. To put it another way, we’re really far away from full automation since we (as an industry) can’t even fully utilize the technology at hand.

          • taxintern

            onesource tax provision – thomson reuters software, thought you were still speaking on tax.

            also – a lot of ‘automation’ software in the accounting world is clunky as fuck. mainly due to the necessary complexity. you would think tax compliance hours would be super low now a day, but in reality it’s just the rate that went down because a good portion of the time is getting gosystems (or whatever you use) to show you the right god damn number on line whocares.

            • N.E.R.D.

              I use CCH ProSystem fx/Engagement. That’s why I figured your acronym meant what I was thinking but was for a different software.

              “a lot of ‘automation’ software in the accounting world is clunky as fuck. mainly due to the necessary complexity.”

              Most definitely. I see this being further refined and developed before I see full automation. It’s still very hard to code properly where I want each number to flow through to, and sometimes they go to stupid input fields like Overrides; sometimes the fields don’t even exist or are controlled by something I can’t code it to.

              Anyways, I think we’re close to the same thoughts on the issue. Cheers.

      • LikeABoss

        I think what would help the automation tremendously would be if the big vendors (go systems & profx) came out with a set of standardized workpapers that help you calc your m’s. I’ve noticed over like the last 5 or so years, both products have gotten smoother when it comes to doing the import of the TB after you post the TJEs, but you still have to do tax workpapers outside of the TB and tax return software that slow the process down in a lot of cases, especially b/c each workpaper for each client is just slightly different. Take a 263a calc or a dpad calc for example. There’s no reason why they couldn’t come up with a standard workpaper that would allow you to plug in the relevant data in the workpaper, and then just automatically flow it through the return. I know engagement has TB linking in the workpapers, but they could go a long way to improve on that, and it’d be a huge time saver. Another big time saver would be depreciation. I think most firms use a separate software to calc tax depreciation (fixed assets cs, profx fa, bna, etc.). In my experience, the only one that does a decent job of bridging to the software is profx, and even that is super cumbersome. I find personally that these tasks take up a lot more of my time on engagements than verifying that the TB is bridging over correctly.

        • N.E.R.D.

          I very much agree. Great post.

          We use Prosystem fx Engagement and it can sort of utilize “standard” workpapers with the “TB Link” feature. I can set up a 263A workpaper to link to the TB so it’ll auto-populate from the central TB, but as you said this is still cumbersome to set up and any changes to the base TB and your standard WP may need to be set up again.

          I think refining how the software integrate will the the way of the near future. Automation will have to come after that.

          • I was on a debate panel at Xerocon last year, Automation v Offshoring. The conclusion was that firms should look at automation options first for reasons mentioned by other posters. We have killed a lot of data handling in our processes by using a lot of technology.

            In my next piece I’ll talk about technology, automation, AI and single ledger theory.

            • N.E.R.D.

              Cool!

              Offshoring vs. Automation is something I have considered separately, no comparatively.

            • Mountaineer

              What is single ledger theory? Google search results were blocked at work! 🙁

    • SouthernCPA

      A lot of the work product I’ve seen from India, et al, is pretty terrible, but improving, and I’m sure over time, will continue to improve.

      Back office functions will continue to be automated and outsourced.

      However, many clients especially smaller companies are still not “paperless” and thus it still takes accountants going on-site to conduct audits and to get info needed for tax returns and for accounting write-up. Younger business owners are starting new businesses that are more paperless, however, existing businesses really aren’t converting.

      But all of this is on the daily transaction level. The future for American-based CPAs is in consulting and strategy. Those things will not be outsourced in significant numbers, mainly because business owners want to discuss these things with individuals who can speak decent English.

      That’s not going to change for decades.

    • The Horniest Partner

      We hire in Kentucky, aint that off shoring?

      • N.E.R.D.

        Might as well be.

    • Big4Veteran

      Back when I was coming up in the audit profession, a significant amount of our time during fieldwork was spent meeting with clients, asking them questions, asking follow up questions, etc. You know, face-to-face human interaction. These days, however, most communication between the auditor and client seems to occur through email and other electronic forms. This is probably due in part to the PCAOB turning auditing into a “check the box” exercise rather than a human interaction. It’s also partly due to “kids these days” preferring text messaging and email over speaking directly to another human being, which would require, you know, interpersonal skills (eww).

      TL:DR My entire ON SITE audit team could be replaced by Indian or East Asian migrant workers tomorrow and probably very few people at my company would even notice.

      • Big4Star

        I have not experienced what you wrote above. We have interaction with the client all the time. Face to face is one of the things the clients crave the most. We have had issues at times for not being much on-site. I don’t think we can outsource Audit at all. 80% of the work has to be done in-land.

    • Geri

      Come on keep the jobs where they start please!

    • Otis

      I’ll be candid in saying that I’m pretty new to the public accounting world. But that said, I’ve spent the past year specifically looking for more work we can send offshore. I’ve found that all the work we’ve gotten back is far from being a final deliverable. Our offshore team can hardly clear exceptions, let alone liaise with the client about specific accounting issues. Where they have been tremendously helpful is weeding through the mind numbingly voluminous work that provides little value from a learning experience to our new hires. In fact, having our SDC perform the initial exercise (populating the testing, combing through the reports, etc…) has arguably created a better learning experience as our associates are now only working with the unusual areas of the testing rather than spending 90% of their time formatting and copying tickmarks. So while I can really see automation / outsourcing improving efficiency, as it has definitely done so on my engagement team, there will always be areas of the audit that require some level of judgment and client communication – something I’ve found our SDC / automated audit processes just can’t address.

      • advisorynerd

        This is spot on. People get bent out of shape because the work product isn’t 100% perfect, but a) it doesn’t need to be, simply getting stuff 75% of the way done is helpful enough, you just have to make sure to set your expectations to that quality of work and b) nobody wants to take the time to develop and give constructive feedback to the Indian associates, so they never learn anything, get sick of doing bitch work, and inevitably quit (which makes it impossible to develop quality people).

    • Chipman69

      No firm does offshoring as DYNAMICALLY as GT!!!! GT has made Bangalore its CHOSEN MARKET for DYNAMIC tax professionals who possess an INSTINCT FOR GROWTH greater than their peers that work for the Big 4’s outsource centers!!!! GT’s Bangalore professionals use their WHOLE SELVES to penetrate US client files and deliver a marginal, but cheaper, work product!!!!

    • Mountaineer

      KPMG announced its goal to basically do away with staff
      level and only have seniors a few years ago. The ultimate goal is to make the
      pyramid into a diamond, however it will more likely become a house shape in
      order to train domestic employees.

      For off shoring to work, clients will have to get past the ick factor of poor
      client contact and security. Honestly, I’ve seen very smart people have serious
      reservations about changes in technology and processes that would provide huge
      benefits to them. Adding a foreign component to the equation makes it a lot
      less likely that it will ever be widely adopted, at least not if we are
      outsourcing to developing countries.

    • Two Dice on Felt

      I can tell you from personal experience that offshoring isn’t going anywhere in the Big 4 anytime soon and is increasing every single day, and at a much faster rate than automation. People are getting more on board with the comment that it just has to be “75%” right because that takes a lot of the grunt work out of the system. In addition, since when do we think interns and associates do all of their work 100% right? I’ve worked with people in India who do way better work than some onshore associates and vice versa.

      The trouble with the India in that respect is the lack of the immediate, in-person feedback and the overall connection they feel to an engagement because they work on so many during the year, so they don’t improve as quickly when you tell them they are sucking at their job. But firms are looking at changing that dynamic as well with how they structure their support for on-shore engagements and some of the changes have dramatically cut down turnover in India so you can have more confidence in people retaining what they’ve learned and applying it next year (but it’s not like anyone ever quits public accounting on-shore, right?)

      Timezones can be an issue but so many teams deal with global counterparts now that it’s somewhat second nature and the Indian teams are always the ones who have to adjust to the US timing. The teams who get the best results from offshoring have come up with workable plans for that.

      While regulators are bitchy about everything, it seems to me that they mind offshoring less because its still real people doing things versus automation of audting since that means they need to understand how a computer actually works.

      As for replacing jobs – please – the big firms are using that time save to work their onshore folks into the ground on other revenue producing projects. For every hour that gets sent offshore, the firm is trying to find 2 hours to replace it with new clients. A good US staff person shouldn’t worry about their job because of offshoring.