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Offshoring has quickly moved from a staffing workaround to a core operating strategy in public accounting.

But does it actually improve firm performance?

Rob Brown and Chelsea Summers unpack what the latest IPA data shows about how offshoring is impacting growth, profitability and productivity across firms.

They explore how adoption has expanded across firm sizes, why larger firms are further along in building global teams and how smaller firms are beginning to experiment with similar models.

The conversation also highlights a central tension in the data. Firms using offshore staff are reporting higher partner income and slightly higher growth. At the same time, traditional productivity metrics like revenue per FTE appear lower.

Rob and Chelsea discuss what is driving that shift and why it may not be a negative signal, but rather a reflection of increased capacity and different staffing structures.

They also explore how offshoring is evolving beyond compliance work into areas like client accounting services, analytics and advisory support.

Offshoring is no longer just a staffing solution. It is becoming part of how firms design their operating model.

Does offshoring actually make accounting firms more profitable? Some firms call offshoring or outsourcing a necessity. Others say it's a competitive advantage, but today we want to go one step deeper. In a previous episode, Chelsea Summers and I talked about how offshoring has moved from a fringe idea to something that nearly half of the accounting profession is doing. Today we're asking the same question, does offshoring actually make accounting firms perform better?

Yeah, I'm really excited to dig more into offshoring and outsourcing because so many

decided that that's something that they want to do, but are saying, is their ROI worth it? How does that, how does that play inside of our firm?

Exciting times. Let's get moving. This is the Inside Public Accounting podcast where we turn the profession's most important data into insights that firm leaders like you can actually use. I'm Rob Brown. Joining me as always is the face and the voice of public accounting, Chelsea Summers, executive director. Welcome.

Yeah, so last time we talked about offshoring, we focused on adoption. How many firms are doing it and why? But as more firms start integrating offshore teams into their operations, we're starting to get enough data to look at something that I think is a little more interesting. Not just who is outsourcing, but how it is actually affecting firm performance. And the numbers are telling a pretty interesting story.

Yeah, we're going to dip into these numbers. Just first for clarity, Chelsea, people often use outsourcing and offshoring in the same sentence and meaning the same thing. Is there any distinction for you or can we wrap them under either definition for this show?

Yeah, in our survey, we use offshoring as FTE that are either through a third party or through your firm, employees of your firm in another location and outsourcing as more project based. We're sending tax returns to a company. But for the purposes of this conversation, let's use them interchangeably.

That's worth doing.

So before we dive into the performance side let's level set here. I'm intrigued on how widespread this is now because a few years ago there was a stigma wasn't there about offshoring and outsourcing. It was experimental back then.

Yeah, and the data is showing that it's much more mainstream now. Across all the firms in our latest survey, 47 % are using offshore staff and around 37 % are outsourcing tax returns or project-based work. So we're getting very close to half the profession using some form of global outsource offshore staffing. And when you look at the larger firms, those numbers are even higher. For firms over $75 million in revenue,

Nearly seven out of 10 firms are using offshore staff. This is telling us that it's not just a tactical decision anymore. It's becoming a structural part of how firms are choosing to operate.

So in other words, the bigger

the firm, the more integrated this strategy becomes. And that makes sense. They've got the infrastructure, they've got the workflow systems to actually manage global teams.

Yeah, larger firms have the scale and processes that allow them to run more complex delivery models. But I think what's interesting is that the smaller firms are really starting to experiment with it too. Although not necessarily the same scale, but even a small firm might bring in one offshore staff member or outsource a few hundred tax returns during busy season. So adoption is really across the board, just at different levels of maturity.

Now looking at your latest research, one thing that stood out for me is that adoption is not slowing down. It's like a juggernaut. It's really gathering pace and FEMS are planning to do even more,

Yeah, I think that's one of the clearest signals that we see in the data. Among the firms that already are outsourcing or offshoring work, 60 % say they plan to increase their usage next year, with roughly a third expected it to stay the same. And that leaves only a very small percentage who plan to decrease that in the coming years. So firms are not pulling back. They're really leaning into it further. ⁓

And evidence

of that is one of the big events here in the UK, Chelsea is called Accountex. In fact, it's one of the biggest events in the world. It's a two day event in London. It takes up the space of three or four football pitches and there's three or 400 vendors in there in the accounting space. A couple of years back, there were 57 outsourcing and offshoring vendors on the floor. Now they've reined that in, but it just shows you the proliferation of companies out there that are offering these services to accounting firms.

What we're seeing from your data then, this isn't just a temporary response to staffing shortages.

Yeah, it's really a long term operating strategy. A few years ago, many firms approached offshoring as a stopgap. They needed help during busy season, they couldn't hire enough staff. So they started to experiment with outsourcing. And now the conversation has shifted. Firms are designing their operating models that assume offshore capacity is part of their team.

So let's

hit performance because firms often assume all this outsourcing off-shoring is going to save them a ton of money. But what do the numbers actually show?

Yeah, so I think it's pretty interesting the data on the outcomes. When we compare firms that use offshore staff with those that don't, there are some differences. And the first is organic growth. So firms that use offshore staff report about 8.1 % organic growth versus the firms that don't at 7.5. So firms with an offshore strategy are growing slightly faster.

Well, that's not a huge gap, but it's certainly noticeable.

Sure, it's not huge, but I'm sure that firms would prefer the 8 % growth over the 7 % growth. But the more interesting metric is in partner income. Firms using offshore staff report an average net income per partner of 792,000. Firms that don't offshore are closer to 728. So 792 versus 728. That's a meaningful profitability difference.

Absolutely.

As a former high school math teacher, can tell you that that is more significant, but I'm sensing there's a twist in your data here because productivity numbers are telling a slightly different story.

They do. When we are looking at revenue per FTE or revenue per full-time equivalent, the firms that offshore actually come in a little lower. Offshore

around $220,000 per FTE, while firms that don't offshore are closer to $249,000 per FTE.

And we touched on this in a previous episode on revenue per full-time employee, which is one of the great metrics you value. I know. And it sounds counterintuitive, doesn't it? Why would productivity be lower if profitability is higher?

Yeah, so the revenue per FTE is lower and it's what we would expect when firms add offshore teams, they increase their headcount. Those additional team members often handle high volume compliance work, which expands their capacity, but it

dilute the revenue per employee metric. So firms might have more people generating more total revenue, but the average per person drops slightly.

Which means the traditional productivity metric might need to evolve.

Yeah, I'm not sure that evolve is the correct word, but it certainly makes data interesting. It's one of the things we're watching closely at IPA is how the global staffing models are changing the way firms measure efficiency. That's why we had a whole conversation on that metric. So metrics like the revenue per FTE were designed for traditional staffing models. As firms build distributed teams, those benchmarks may need to adjust.

And I gathered

from the research another interesting theme. It's not just about a stop gap, as you said, or busy season and tax preparation anymore. It's expanding into other areas.

Yeah, and I think it's one of the biggest shifts that we're seeing. Historically firms outsourced really very specific tasks, mostly tax return preparation or routine audit work. Now we're seeing outsourcing expand to client accounting services, financial reporting, data analytics, and even advisory support. Technology is really making it easier for distributed teams to collaborate on more complex work. So offshoring is moving up the value chain.

We did a recent episode on advisory and the shift there. I wonder if Offshore and Outsourcing are to play into that. If they can do advisory too, that is going to change the game.

Absolutely. And we're also seeing some geographic shifts. Traditionally, most offshoring happened in places like India or the Philippines. But now firms are exploring regions like Latin America, Eastern Europe, and Africa. Sometimes because of time zone alignment and language capabilities.

For example, Latin America allows firms to work in almost the same time zone as the United States, which can make collaboration a lot easier.

Definitely global

teams are shifting their approach now to support a lot more than compliance. So put yourself in the shoes of a managing partner, Chelsea watching, listening to this. What should they be thinking? Because clearly firms are approaching this in different ways.

Yeah, we tend to see three broad approaches.

some firms treat outsourcing as tactical. They use it primarily during busy season. In the second bucket, we see some firms build permanent offshore teams that support their compliance work year round. In the third bucket, the most advanced firms are building what you would call a global delivery model, where offshore teams are fully integrated into the firm's workflow.

They're part of the culture. participate in training and they're embedded in the operating model inside the firm.

And those firms

probably see the biggest benefits.

Yeah, the firms that get the most value out of their offering teams tend to treat it as a strategic capability, not just a cost saving measure.

Yeah, so Crystal

Ball time. Let's look ahead a few years. You're very good at this. What is the data telling us is going to happen next?

I think we're gonna see a couple of developments. I think we're gonna see more integrated global teams. It won't feel like offshoring per se anymore. It'll just feel like part of the firm in another office. The second, think offshore professionals will move into more specialized roles. They're not just going to be doing compliance work, but as advisory grows, they're gonna support that with the analytics and consulting. And I think the last thing I see is that firms will start to rethink their performance metrics.

because global staffing models are going to change the economics of how the firms are operating.

I'm just thinking Chelsea, one of your values that you speak about a lot in your personal branding and you speak in his transparency in firms. Do you feel it's important for firms to be transparent with their clients about how they're using off-showing and outsourcing?

Yeah, and I think there was a lot of fear initially when firms started doing it that, when we tell our firms, they're not going to want to do it and they're gonna move to somebody else. But I think the percentage of firms or the percentage of clients that have an issue with that is so minimal and really the adoption is so high. We live in a very global environment right now and everybody is used to the work kind of crossing between borders. So I think it was much less of a concern than firms feared it might've been.

So today's takeaway is that offshoring isn't just about saving money, it's about capacity, scalability, strategy, competitive advantage.

Yeah, I think the real

isn't whether a firm outsources their work, it's really how thoughtfully they integrate it into their operating model. So the firms that figure that out are going to have the advantage in the years ahead.

Yeah, great insights as always. Thank you, Chelsea. And thank you to our wonderful and growing audience here. If you're listening, I want to share how your firm is approaching Offshoring. We would love to hear from you. You can reach out through the Inside Public Accounting website. And if you've enjoyed today's conversation, please share the episode with your colleagues and ⁓ share the love.

Thanks, Rob. We look forward to the next one.