Will The CPA Offshore Outsourcing Model Survive the Agentic-AI Threat?

For two decades, offshore outsourcing has driven the growth of CPA firms. Bank reconciliations, AP, payroll, audit support, and a lot more went offshore. Labor was cheap(er) and abundantly available (no staffing shortage offshore), turnaround was fast, and the process worked well enough.

Offshoring worked so well that it became a “strategy” for CPA firms, which built workflows for it. CPA firm clients were not necessarily concerned about it. No wonder offshore service firms continued to emerge (mushroomed!) to meet the demand.

But now, these workflows, expectations, and business models face a new threat.

Agentic-AI.

Will the economics that made offshoring work disappear?

Offshoring’s secret weapon was always built on three key factors:

1. Labor cost differential: Highly skilled labor in Asia or other regions could be hired at a fraction of U.S. wages.

2. Time zone leverage: The “follow the sun” model allowed overnight task completion.

3. Staffing scalability: The ability to ramp up or down capacity through a provider without hiring directly.

• Cost: AI-driven automation can significantly reduce well-defined manual finance and accounting workloads without increasing overhead. AI has no hourly rate, no benefits, and no office lease. No hiring and training engine required either.

• Turnaround: Deloitte reports that advanced automation can shorten "close" cycles by two to four days, eliminating the time advantage of cross-border handoffs.

• Scalability: Offshore staffing takes weeks to ramp up. AI scales instantly, in seconds.

A model built on the wrong type of resilience?

Most offshore accounting providers are not tech companies. They are labor companies. Traditionally, clients hired offshore providers for the core job of delivering affordable, scalable labor to perform standardized, repetitive tasks. AI redefines this job by not only automating these tasks with greater efficiency but also by enhancing accuracy and speed. Now, the question is:

The 'job to be done' shifts from just providing labor to delivering strategic insights and automation capabilities that AI can offer effortlessly. The core value proposition of offshore outsourcing companies has been supplying trained personnel for repetitive, rules-driven functions, the precise domain in which AI now delivers step-change efficiency gains.

By all indicators, it is reasonable to anticipate that Agentic-AI can (and will) disrupt the core services of offshore outsourcing companies within the next three years. Yet, despite this awareness, adoption still seems low. While many recognize the coming shift, several outsourcing companies and CPA firms seem to hesitate due to several factors. Cultural resistance within organizations often slows down the adoption process, as employees and managers may be reluctant to move away from established practices. Regulatory challenges create uncertainty, as CPA firms must navigate different legal frameworks while integrating AI technologies. Capability gaps also play a role, as some providers lack the necessary technical expertise to implement and maintain advanced AI systems. (That is where a new breed of solution providers can come in with Agentic-AI custom-made for CPA firms). 

Addressing these frictions is crucial for CPA firms and offshore outsourcing companies to transition in this evolving landscape effectively. The gap between knowing the risk and dealing with it creates vulnerabilities.

Are offshore outsourcing companies already seeing the writing on the wall?

At the biggest CPA conference of the year, out of the total of 300 vendor booths, there were 47 booths of offshore outsourcing companies. Next year at the same conference, there were fewer than 15! 

Over the past few months, six (no, seven) different offshore companies reached out to me with a strikingly similar ask: 

• Sell their services to U.S. CPAs… 

• On a commission-only basis… 

• With zero brand, positioning, or go-to-market investment.

One of them shared a $60 million revenue target over three years, supported by a $60,000 marketing budget. That’s 0.3% for their entire U.S. growth strategy. (Yes, this was a real conversation).

They all had sky-high revenue goals, built on zero real investment. No positioning. No message. No skin in the game. Essentially, NO serious commitment to serve this market. Such companies' business model is simple: 

• YOU (the firm) are their "free" salesperson.

• You bring in leads and prospects. 

• You close the deals.

• They will process, they will deliver - and 

• You keep the "commission."

Now, the question is - if they are not investing in their own growth, why should CPA firms trust them with theirs?  Actually, the real, bigger question is:

CPA firms don’t need to wait for a turning point

CPA firms aren’t loyal to offshore contracts, just to economics, which are changing:

• Agentic AI can work 24/7 without any breaks.

• It leaves a permanent record of everything it does, making compliance easier.

• It eliminates the risk of sending sensitive data across borders, a significant concern for firms handling client data.

This shift is already underway. Firms that previously needed 20 offshore AP staff might now require only ten, or fewer. Any process that has repetitive, very defined, rules-driven data handling requirements that was sent overseas can be processed in-house overnight using AI. 

If you are a CPA/Accounting Professional, where are you in your Agentic AI journey? Please click here to take this 1-minute poll.

Do offshore providers now face acute, systemic risk?

If one firm leaves, saves money, and gets things done faster, word spreads quickly - at conferences, meetings, and partner dinners.

So, for offshore outsourcing companies, losing a single important client is rarely just one client. It becomes a pattern. 

I was recently told by one offshore outsourcing company that PE firms investing in CPA firms have emerged as a back-door threat, as PE firms invariably demand that the firms they invest in use as much tech as possible, including Agentic AI, to reduce costs. 

A significant historical parallel can be drawn from the rise of online travel booking, which led to the rapid decline of traditional brick-and-mortar travel agencies. This industry shift took place over a few short, aggressive years as consumers rapidly embraced the convenience and efficiency of digital booking platforms. Similarly, advanced AI technologies promise to redefine current business models by providing unprecedented efficiency and automation. 

When, not if

For some offshore providers, the reckoning will come suddenly, maybe because a client starts using their own AI, or because of a regulatory review, or because a cost comparison at a partner meeting doesn’t look good, or the PE investor makes it mandatory to leverage a tech platform common across the firms it invested in. 

For others, it will happen slowly, as contracts get smaller, pressure to use Agentic AI to reduce "hours and costs" mounts, renewals stall, and “test” projects never come back.

• Would CPA firms need fewer offshore accounting service providers? 

• Would more firms use in-house, AI-managed workflows? 

• WHEN will this shift reach maturity? 

There are several such questions that attack the core business model of offshore outsourcing companies that serve the accounting profession. 

The ones who will feel it first will be the providers who do the work easiest to automate. Those who will feel it the least will be those who do the most "judgmental," advisory-enabling work. But no one will be completely safe in the long term. 

So, will the offshore outsourcing companies reinvent themselves? How? 

Agentic AI wouldn't just compete with offshore, or for that matter, onshore workers; it can change the very nature of competition itself. Location wouldn't matter, speed would be instant, and cost advantages would no longer be about human labor costs. 

Do you agree? Disagree? Please share your thoughts here.