The Truth About Accounting Outsourcing to India

Whether an individual or company, based in the United States or abroad, chances are you or someone you know has been impacted by the outsourcing craze of the mid 2000s that has continued through today. One of the most impacted segments of the economy has been financial services that have, for the most part, been specifically outsourced to India.

Love it or hate it, Thomas Friedman's "The World is Flat" has been a huge driver for the accounting profession, as well as paralegal and other legal services, to be outsourced. The main reason for outsourcing involved mostly United States based companies who were looking for a less expensive and more efficient way to complete compartmentalized tasks. Personal services - especially personal financial services - are almost always billed to a client by the hour and bringing down this hourly cost would give a huge competitive advantage to those who implemented such a scheme.

One of the biggest perceived advantages of outsourcing is the potential savings to the company that is employing outsourcing as well as the end user. An accounting firm, for example, might charge $150 per hour of a staff accountant's time in the United States, but because of the lower cost of doing business in India or a myriad of other countries, the same accounting firm could charge less than half the price for the same client for the same work. Another huge advantage for many professional service firms is increased capacity. Before the economy began it's decline in 2008, many companies needed more human resources than they were able to handle on their own. Offshore options gave these companies more options to hire people without the commitment of American or other western labor laws.

A huge political issue, outsourcing has taken on an increasingly negative connotation in American popular opinion. One of the main problems with outsourcing, American workers argue, is that jobs are being lost to foreign workers. While this may be true, another side of this debate is the argument that skilled American workers are being elevated in the sense that the product that is outsourced may be less complicated or less challenging, leaving more complicated and intellectually stimulating work for American staff.

Another downside to outsourcing are potential data security issues. Though the internet has become more secure, when it comes to social security numbers and sensitive bank account information, a majority of consumers are afraid of identity theft. Indian outsourcing companies argue that data is encrypted and employees are prohibited from stealing personal information, but many Americans seem to be unsure as to whether the gamble is worth the risk.

So what's a consumer to do about outsourcing? When it comes to professional services, including accounting, it is best to speak to the professional you're working with or the managing partner of the firm in question to decide if outsourcing is the right choice for you. While there are many upsides including a reduced cost, there are many downsides to consider as well.

"The World is Flat". http://en.wikipedia.org/wiki/The_World_Is_Flat

"Outsourcing". http://en.wikipedia.org/wiki/Outsourcing

Top 7 Outsourcing Advantages. http://operationstech.about.com/od/officestaffingandmanagem/a/OutSrcAdvantg.htm

Top 6 Outsourcing Disadvantages. http://operationstech.about.com/od/outsourcing/tp/OutSrcDisadv.htm