It could be argued that the Securities and Exchange Commission didn’t foresee all the dominoes that would fall when it began requiring U.S. companies to use eXtensible Business Reporting Language in their filings in 2010. That includes the added burden on IT staffing and support.
To be sure, the end vision was a laudable one. Briefly, XBRL is a global standard for exchanging digital business information. Documents coded with these electronic data tags would presumably make it much easier for investors to research and monitor developments within publicly traded companies.
The reality, though, has been something less than ideal. The results from the first wave of companies required to adopt XBRL are coming in, and it is clear that their error rate has been quite high — as much as 15.8 errors per submission. Also, executives interviewed by publications have warned of a long learning curve, perhaps as much as two years, while they seek strategic IT staffing or retrain current in-house staff.
Early Effort at Outsourcing Was a Disappointment
Not surprisingly, many of these companies offloaded this complex task to third parties, especially printers of financial documents, who had studied the regulation and XBRL standard. Now, though, a school of thought is forming that XBRL tagging may be better done in-house in part to better control the quality, according to a recent report in CFO.com. The publication pointed to a survey
by the Financial Executives Research Foundation that found that nearly half of financial executives surveyed planned to do just that.
The publication also told of power-management company Eaton, which outsourced the XBRL tagging of its 10-Ks and 10-Qs. However the company realized that it needed the control and flexibility of doing this task in-house. It also wanted faster turnaround times than the printer could provide. And then there was the issue of cost: Bill Myers, Eaton’s vice president of technical accounting and reporting, told CFO.com that he expects to save about 30 percent by bringing it in-house.
But Outsourcing Remains a Viable Option
This is not to say that the outsourcing of financial-related tasks is a non-starter for firms that want quality and lower costs. Indeed, the business case for outsourcing of higher-end tasks for companies, especially smaller companies, is a solid one. Companies can invest their resources in core expertise, IT infrastructure and talent while leaving the more basic work processes to the outsourcer. As for larger companies, especially multinational ones, shared service centers have become a common structure. These centralized offices handle a range of tasks from transaction processing to accounts-payable functions to general ledger, and reconciliation functions.
And while this model is still strong and viable, here too, some companies are pushing to bring these tasks in-house. Last year General Motors announced it would bring 90 percent of its IT staffing positions back inside the company, Wired Magazine reported.
Insourcing, in short, is a growing trend that is expected to become more pronounced as the year goes on. The case for insourcing, though, will likely remain best typified by such examples as XBRL – that is, complex, technical and detail-oriented tasks that are important to business operations. After all, few companies want to have a regulator, such as the SEC, irked with them over numerous errors in a filing.