The new face of tax outsourcing.

• Author: Holub, Steven F.

Business process outsourcing, in all its forms, is rapidly becoming the wave of the future. Whether it is information technology, payroll or tax compliance, companies are discovering that outsourcing is a proven way to streamline operations, focus on core strategy and transform their business functions.

Today's ever-competitive environment challenges tax practitioners to provide clients with greater value. This value must be wed with cost reduction in the new economic reality many businesses face in the aftermath of the events of Sept. 11, 2001. More than ever, CFOs and tax executives are searching for methods to weather the economic uncertainty. Many of these companies are viewing outsourcing as a legitimate way to accomplish their business objectives.

Tax outsourcing confers more than just a deliverable, such as a tax return; it also provides cost-reduction, process simplification and increased shareholder value, while simultaneously reinforcing the tax-outsourcing provider as a trusted business adviser. When it comes to corporate success, companies have to take care of the core business; delegating nonessential functions to specialists helps them to achieve this goal.

Outsourcing's Roots

Outsourcing has been around for many years. The world of information technology (IT) instituted one of the first large-scale applications of the outsourcing business model. Computers and networks were extremely complex and not a core process of organizations. Companies could not manage without computer systems, yet technology needs were here to stay. How could they run the intricate IT function without having to retain in-house experts? The cost, among other issues, would affect capital needed to operate the organization's core functions and the ability to increase market share. Enter IT outsourcing. Corporate executives "leased" the operation, maintenance and execution of key tasks without owning the employees or the hardware.

Tax outsourcing is a direct descendant of IT outsourcing. Over a decade ago, companies began to outsource additional noncore corporate functions--finance, accounting and tax among them. Businesses that had been in operation for years (as well as entrepreneurial startup companies) realized that these cornerstone processes could shed cost-center status and operate as value-added contributors to the bottom-line.

Over time, outsourcing's importance as a way to add value has become clearer. Economic globalization has made the business environment more complex and competitive than ever. Focus and commitment to core competencies has become a requirement for survival. Leveraging knowledge, providing value and process innovation are necessary to gain competitive advantage. In the world of tax, outsourcing to specialists who could do the work quickly and cost effectively...