When Control Solutions, one of the biggest accounting firms in the US dealing with Sarbanes-Oxley (SOX) accounting compliance procedures, wanted to recruit accountants for its expanding practice, it looked at Enabilizer, a New Delhi-based accounting outsourcing firm.
The two signed a joint venture agreement on February 22 that allows Control Solutions to outsource its SOX work to the Indian JV.
Rain, a mid-sized South African accounting firm, chose to hire six experienced senior staff from its network partner in India, the Mumbai-based Chokshi and Chokshi for two years.
The firm is facing an annual attrition rate of nearly 50 per cent. Rain and Control Solutions are among the growing breed of accounting firms that looking at India to outsource their work, both on-shore and off-shore. The reason - a looming global shortage of accounting professionals, especially in the US and Europe at a time when accounting regulations are becoming more stringent there.
Akshay Bhalla, CEO of Enabilizer estimates as much as 60 per cent of the F1 visas to the US in the next few years would be cornered by the financial & accounting (F&A) segment, especially as the quantum of on-shore work goes up. Says James Mendelsohn, CEO of MSI, a global network on accounting firms with 250 members, In the US, the number of students going into accounting fell drastically in the wake of the Enron collapse.
But at the same time the regulatory framework under the Sarbanes-Oxley legislation became more stringent. Most firms, especially the mid-sized firms have little but to onshore much of their SOX work as it cannot be taken out of the US.
And there is of course labour and cost arbitrage: Tholons, a Bangalore-based IT consultancy firm estimates that in the financial and accounting services offshoring of common transactional processes yields a 20-25 per cent cost reduction while off-shoring key high-end processes, such as SOX related work, could lead to cost reductions of 35-40 per cent.