If you or your company hasn’t yet confronted the question of shedding some operations and outsourcing them, then hold on; you will.

Outsourcing, especially finance and accounting outsourcing, is growing by leaps and bounds as businesses strip down to their core competencies and as alternatives spring up near and far. Outsourcing represents an opportunity for CPAs to add value in a variety of ways, ranging from helping companies make the right decisions to taking on the work themselves.

The International Association of Outsourcing Professionals estimates that outsourcing is already a $6 trillion-a-year industry worldwide. And it’s not just an option for Fortune 500 companies. It’s been estimated that outsourcing by small businesses in the United States will become a $25 billion market by 2009.

To Anthony C. La Russo, a retired finance executive and author of the AICPA CPE course “Managing Outsourcing,” there are specific steps that should be taken when evaluating whether and how to outsource. But he notes that most businesses “tend to do this on a case-by-case basis.”

Let’s start with some basic tips for helping a company move into or expand existing outsourcing activity:

• Get management involved early on in the evaluation process.
• Do your homework and make a plan.
• Review all of the organization’s processes to select candidates for outsourcing.
• Establish sets of measures to monitor progress.
• Start small.
• Set realistic expectations.

CPAs and company executive management can crystallize their approach to outsourcing by using many of the concepts of “the classic rent-versus-own analysis,” according to La Russo, who is also the author of a business management book, Management: Ready Aim Fire. He explains, “Outsourcing is the equivalent of ‘renting’ equipment — knowledge, skills and individuals’ time. The alternative owns the equipment and hiring people and their associated knowledge and skill sets.”

The following are items that CPAs involved in outsourcing decision-making should consider:

1. Determine Where Outsourcing Fits in the Organization’s Overall Strategy. Only after earnestly determining the organization’s goals and objectives based on its markets and capabilities should it try to determine where outsourcing fits. “Outsourcing should be seen as more of a strategic vehicle to execute an overall strategy rather than a strategy itself,” advises La Russo.

2. Evaluate What Can Be Outsourced. This entails identifying the actions that an organization needs to closely control and which may be difficult or dangerous to transfer to a service provider. The analysis should identify, among other things, which services are crucial to an organization’s competitive position. La Russo recalls that computer-maker Dell moved its toll-free customer service and technical support service to India in 2001 but later realized just how critical those services were to its success. In 2004, Dell returned part of those services back to the United States and subsequently hired 2,000 more employees for the U.S. centers, which it upgraded to the tune of $100 million last year.

3. Monitor the Outsource Activities. Comparing different outsourcing programs within an organization can help determine best practices for its overall outsourcing plan. Benchmarking the organization’s outsourcing activity against competitors or non-competitors with similar functions can help identify new areas in which to outsource.

As La Russo notes, “While there are risks associated with outsourcing, not using it when appropriate is also risky.”

RELATED INFORMATION: The AICPA has some standards that apply primarily to CPAs in public practice who outsource work they're performing for clients. Please follow these links for more information:

• Use of a Third-Party Service Provider to Assist a Member in Providing Professional Services
• Applicability of General and Technical Standards When Using a Third-Party Service Provider
• Use of a Third-Party Service Provider to Provide Professional Services to Clients or Administrative Support Services to the Member

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