Unilever partners with Capgemini to enhance global service delivery for finance and accounting

As finance organizations continue their quest to build global delivery capabilities, some companies are leveraging the networked organizational model.  In this archetype, companies partner with 3rd party service providers to provide capabilities that provides services that would be difficult to replicate in-house. An example is the recently announced deal between Unilever and Capgemini to provide finance and accounting services to 130 countries.  An excerpt from the press release:

Paris, 19 December 2012 – Capgemini, one of the world’s foremost consulting, technology and outsourcing services providers has been selected by Unilever, one of the world’s leading consumer goods companies, as one of its global Strategic Suppliers under its ‘Partner to Win’ programme. Capgemini has also been awarded a more than €100 million five-year outsourcing contract for Unilever continuing its seven-year relationship delivering Unilever’s Southern Hemisphere Record to Report operations, global intercompany processes, as well as Access Control and Reporting & Monitoring globally.

Outsourcing a substantial portion of a finance organization is not for every company.  It takes a huge cultural shift to move in that direction.  However, for companies like Unilever, it enables them to create a more effective global delivery network for finance while enabling them to focus on their core business.

You can read the entire press release at: Capgemini signs a new Finance & Accounting outsourcing contract with Unilever.

Philippine Outsourcing Threatened by a Lack of Trained Workers

Despite the global slump, and perhaps because of it, the outsourcing industry is struggling to find enough trained workers to meet expected demand for outsourcing.  Mayala Business Insight has an article describing the problem.  Here's an excerpt:

THE outsourcing industry may be hard-pressed in adding 80,000 to 100,000 new jobs every year due to what is now described is the acute problem of declining trained manpower.

But despite this, the country’s information technology and business process outsourcing (IT-BPO) industry remains optimistic of hitting double-digit growth in revenues this year.

"80,000 is a stretch," said Trade Secretary Gregory Domingo at the sidelines of the 3rd International Outsourcing Summit (IOS) at Sofitel Manila yesterday.

Addressing the delegates earlier in his welcome remarks, Domingo said: "It is a supply-side problem, not a demand-side problem."

Coming from a wide base of 600,000 workers in the industry, adding 80,000 to 100,000 workers every year suited to the industry’s requirement is a challenge.

Here's the link to the full article: Outsourcing Threatened by a Lack of Trained Workers.

Surprise: Outsourcing Buyers Look at More than Price

A recent survey conducted by HfS Research shows that buyers of outsourcing services are looking for more than low cost when it comes to outsourcing relationships.  The survey asked purchasers of outsourcing services what they thought was important and compared their responses to what providers of outsourcing services thought buyers wanted from them.

It's no surprise that some metrics like pricing aligned pretty well between providers and buyers.  What is surprising is the degree of difference between the two groups when it came to the soft lever of transformation such as governance and change management.  The survey revealed that buyers placed a higher level of importance on these soft transformational levers. Shown below is a graph which summarizes the survey results:

Source: HfS Research

What is surprising is that outsourcing providers underestimate how much help clients would like in managing change in their organizations.  This is obviously an opportunity for those providers, but they'll need to make their capabilities clear so that buyers clearly understand the value these providers are rendering over the contract lifecycle.

You can read the entire post at The Undisputed Facts of Outsourcing Part 7: Service Culture is the New Differentiator.

Only five days until the Eastern & Central Europe Shared Services & Outsourcing Conference

There's still time to register for the IQPC Shared Services and Outsourcing conference in Krakow, Poland.  The Conference will be held on 9-10 March, 2011.

Some of the many topics to be covered include:

• KPI's: The Best Form of Measurement
• Balancing Customer Service and Bottom Line Needs
• Priming the Ejector Seat: Devising Exit Strategies Just In Case
• Automation: Beyond Initial Implementation
• Reset Shared Services to Maximise Value Creation

In addition to the many workshops, this conference represents a great opportunity to network with others who are on the shared services and outsourcing journey.  I recommend that you attend if you are able to do so.

European IQPC Shared Services and Outsourcing Conference - Launching a Shared Service Center in Central and Eastern Europe, Maintaining a Low Attrition Rate, and Much More

The Shared Services and Outsourcing Network is hosting a conference in Krakow, Poland on March 9 - 10, 2011.  One of the workshops focuses on planning and launching a Shared Service Center in Central and Eastern Europe.  The workshop will cover topics such as:

• Critical success factors for any Shared Services implementation
• Defining the project scope (depth and breadth)
• Recognising the critical importance of the “customer”
• People and organisation structures
• Systems/technology and ERP
• Processes
• Considering outsourcing as a possibility
• Criteria for your location decision

You'll also have the chance to tour the UBS Shared Service Center in Krakow.  The UBS SSC spans the areas of legal, compliance, risk, research, operations, IT, marketing and analytics.

To get an additional perspective on relevant topics covered by the IQPC Shared Services and Outsourcing Conference, you can listen to a podcast on ways to keep personnel turnover low in your Shared Services Center:

Tony Roberts-York: Shared Services: How To Achieve Attrition Rates of Below 10%

You can sign up by visiting the Conference website. 

Genpact plans to double US headcount in 2-3 years

A number of India-based companies have made no secret of their desire to break the mold of an "Indian only" company.  Many have established country presences in the U.S., the U.K. and elsewhere.  In a recent news article, The Hindu Business Line reported that Genpact plans to substantially add to their headcount in the U.S.  

An excerpt from the article:

Offshore BPO major Genpact is planning a major ramp-up of its ‘onsite' presence by doubling the US workforce to 2,000 professionals in the next 2-3 years. It currently has about 1,000 professionals in the US, across functions such as revenue cycle management, mortgage processing and loan modification.

“This whole area of business process management and driving improvement in business processes will demand more onsite presence, more domain-specific capabilities and very high-skilled re-engineering capabilities. I think we need to be closer to our customers when we do this kind of work. So we are very comfortable from a business model and demand perspective, with regard to our hiring plans in the US,” the Genpact President and CEO, Mr Pramod Bhasin, told Business Line.

You can read the full article here: Genpact plans to double US headcount in 2-3 years

After the go-live: Ten focus area for effective Shared Service delivery - Part 8 - Reevaluate the Captive vs. Outsourcing decision

A key decision in the development of a global delivery model will be the decision to outsource specific functions.  There are a variety of reasons why a company may choose to outsource a finance process, including access to current technology, access to industry specific knowledge and ability to scale up capabilities without a large capital investment.  A detailed business case detailing the reasons for the outsourcing decision should be created.  The same hold true for the retained finance organization.  There will be very good reasons why some finance processes will be retained in-house, including reasons related to governance and control.

However, despite the best efforts of the sourcing team to evaluate the overall delivery strategy in the captive vs. outsourcing decision, the reality is that conditions change and assumptions that were once thought reasonable are proved to be untrue.  As part of the ongoing effort to maximize the effectiveness of the delivery structure, the Finance Management team should periodically reevaluate the need to outsource a process that was previously handled in-house.  It may be that supplier capabilities have matured in that area or that competition among suppliers has pushed prices down further. 

Keep in mind that the process works both ways.  Sometimes an outsourcing relationship isn’t working out as planned and it makes sense to insource the process to provide better service.  A company with outsourcing contracts should be continuously reviewing the suppliers performance according to the Service Level Agreement (SLA).  It could also be that a company's strategic direction has changed  and it makes sense to bring some capabilities back in-house.

World-class companies use a portfolio approach to delivering finance services.  There will almost always be a mix of captive and outsourced activities.  In a dynamically changing world, it's incumbent upon finance organization to stay on top of the best ways to deliver those services.

Outsourcing firms get tax break

A story from Shanghai Daily discusses China's efforts to boost its outsourcing business through tax incentives.  Despite the economic downturn, China continues to move agressively to remain attractive to US and European firms looking to outsource IT, BPO and KPO functions.  China has identified 21 cities that are exempt from taxes for companies setting up outsourcing operations.

An excerpt from the article:

OFFSHORE service outsourcing companies in 21 cities will be exempted from business tax effective through the end of 2013 as part of China's efforts to boost the offshore outsourcing business.

Revenues from information technology outsourcing (ITO), business process outsourcing (BPO) and knowledge process outsourcing (KPO) are eligible for the policy, effective from July 1. Firms registered in Shanghai, Beijing, Shenzhen, Guangzhou and 17 other cities can enjoy the tax break, the Ministry of Finance said yesterday.

You can read more here: Outsourcing firms get tax break

10 Tips for Better Outsourcing Contracts

Editor's Note:  This post is based on an article at the Shared Services & Outsourcing Network by Canda Rozier, Principal and Owner of Canda S Rozier, LLC.  It's an excellent article and well worth your time to read it in its entirety.

10 Tips for Better Outsourcing Contracts

1) Do your due diligence upfront

2) Define detailed Service Level Agreements

3) Have the outsource provider 'put skin in the game' 

4) Outsource tasks, not authority

5) Communicate, communicate!

6) Define escalation procedures

7) Embrace change management

8) Define exit provisions 

9) Require the vendor to provide transition assistance

10) Have a fall back plan

New Global Outsourcing Hub - Wyoming?

A report from CNN discusses a new global outsourcing hub and it's not where you think.  This time it's in Wyoming.  The story discusses an innovative strategy of teaching English lessons to students in Asia using a real-time video link to classrooms.

From the article:

When it comes to call centers filled with English-speaking employees, India likely comes to mind. Not a tiny town in Wyoming called Ten Sleep, population about 300.   What Ten Sleep has is not, exactly, a call center. Instead, the town is home to a teaching center that is open 24 hours a day, seven days a week. There, American teachers provide real-time video English lessons to thousands of students in classrooms across Asia via high-speed fiber optic networks.

"This is more of an 'insourcing' phenomenon," said Robert Grady, managing director of Cheyenne Capital Fund, which invested $10 million in Eleutian in February. "We are creating jobs by helping the development and emergence of the high growth economies in Asia. We are the fastest private employer in Wyoming, and we are hiring at a time when job creation is priority number one."

 While this article doesn't directly relate to Finance & Accounting, it does hold some lessons:

1. Global sourcing is just that - global sourcing.  It's no longer a discrete decision between "Onshore" and "Offshore" but rather about defining your talent needs and locating the appropriate talent pool for a competitive price,
2. Creative minds find a way to complement the shift in global sourcing, rather than fighting it.  The company behind this operation could have complained about jobs moving offshore, but they found a way to compete.  After all, who better to speak American then Americans?
3. New talent markets are constantly maturing and shifting.  Even now, India and the Philippines are top locations when English language capabilities are needed, but new markets continue to emerge.  And as we see in this story, sometimes the new market is an old market.
4. Technology continues to drive the ability to source from new markets.  In this story it's the real-time video link.  In Finance & Accounting, it can be about scanning, workflow routing and Cloud computing.  Various technologies reinforce the death of distance and enable a truly global sourcing organization.

Here's a link to the full article.

Manage risk through an Outsourcing Management Office

As more companies look at both onshore and offshore outsourcing for Finance and Accounting processes, there is a greater need to coordinate efforts to manage the risk inherent in outsourcing.  Risk is inevitable in any relationship.  In an outsourcing relationship, the major components of risk include:

• Strategic risk
• Operational risk
• Financial risk

Fortunately, companies are developing effective ways to mitigate that risk.  One way to mitigate outsourcing risk is through an Outsourcing Management Office (OMO).  The OMO is similar to a PMO in that it creates a central standard for policies, procedures and tool sets used to initiate, manage and end outsourcing relationships.  And like PMOs, the OMO can vary widely in its influence over an organization.  On one end of the spectrum is a consultative OMO that provides tools and coaching to govern the outsourcing process.  At the other end is a highly directive OMO that coordinates and aggregates outsourcing relationships and enforces standards.

Some of the activities of an OMO include:

• Coordinate efforts across business units to manage enterprise level risk,
• Provide training to business units on the corporate approach to outsourcing,
• Rationalize outsourcing suppliers to negotiate the best deal,
• Standardize approach to outsourcing to minimize up-front costs,
• Provide contract templates to leverage knowledge from previous contracts,
• Provide coaching to business units involved with outsourcing execution,
• Establish performance monitoring metrics

As outsourcing continues to grow, companies will need to put in place a stronger governance function to ensure that the benefits of outsourcing are realized.  An Outsourcing Management Office is one way of managing that process.

Holding outsourcers accountable for service delivery

Over at LinkedIn.com there's a conversation about holding outsourcing service providers accountable for delivering in accordance with the criteria established in the Service Level Agreement (SLA).  While there are differences, there are some similarities with captive service units in terms of maintaining accountability.  Some things that can be done include:

1. Clearly establish expectations up front.  While outsourced service providers should be considered partners, it isn't at the same level as a captive service unit.  Agreements are much more formal and should be treated as such during the negotiation period.
2. The service provider should provide regular reports with metrics showing compliance with the service agreement.  Depending on the report this could be daily or weekly.  This information should be monitored regularly as part of the governance structure as the client company.
3. Establish a formal reporting mechanism at least monthly.  In addition to daily or weekly feedback, there should be a formal report at least monthly that shows all of the key metrics and how the service provider measured up to the SLA.

When the client company expects regular, written information from the service provider showing the actual performance against the Service Level Agreement, they let the provider know that their performance matters and that it's being monitored.  From the client side, it's essential to obtaining the value from the outsourcing relationship that was identified in the business case.  It doesn't have to be confrontational, it's about two partners living up to their responsibilities.

New survey shows support for Finance outsourcing

A new survey by WNS, a provider of Finance outsourcing services, shows that senior Finance executives support outsourcing.  Shocking, I know.  Seriously though, the survey backs up what I've seen in my own consulting work - that Finance organizations are rapidly shifting to a global delivery model that incorporates resources beyond their own direct organization.  Finance chiefs are looking for stronger talent, a competitive cost structure (read: offshore) and a more flexible cost structure to create a more nimble Finance organization. 

Some of the key findings include:

• Over 75 percent of the finance executives plan to expand their outsourcing programs in 2010,
• Driving corporate cost cutting efforts and improving internal controls are the two most crucial issues in 2010,
• Forty-four percent of the finance executives believe growing the business will be an organizational imperative in 2010,
• Over 85 percent of the finance executives are satisfied with the benefits from FAO (Finance & Accounting Outsourcing).

Here a link to the press release at the WNS website.

Extreme Insourcing: U.S. Edition

As companies who have previously outsourced call center work to low cost countries find it harder to identify additional cost savings, they're asking their partners to help generate more revenue through add-on sales.  As a result, some companies are looking to hire older, more experienced U.S. workers who can work out of their home.  The thinking is that these more experienced workers will be able to generate more revenue even though they cost more to employ.

An article at Portfolio.com puts it this way:

Companies, having cut as much cost as they can, are looking to us to help grow the top line,” said Judi Hand, chief marketing officer of TeleTech Holdings Inc., an international outsourcing company. “That may be the thing we’re seeing the most of.”

The trend is leading outsourcing firms to grow aggressively again in the United States, after a decade in which call-center jobs migrated offshore by the thousands.

Instead of adding new call centers in low-cost cities and towns, clients are asking outsourcing companies to use “virtual” call centers employingolder, more experienced operators working from home.

High-value customers’ calls are increasingly staying in North America, where costs may be higher than offshore, but at-home operators can generate revenue. Simpler and lower-value tasks, which don’t present sales opportunities, are being routed to offshore operators in larger numbers than ever.

This makes me wonder if any Finance activities would be up for extreme insourcing.  The only activity that quickly comes to mind is receivables collection activity.  With internet access, document imaging and workflow, and a dedicated phone line it isn't too much of a stretch to think these calls could be made out of the home.  I do think most other activities would be better handled out of an office location. 

I think the real barriers are organizational and cultural.  Many Finance activities are so integrated that it makes sense to have some level of critical mass at a single location.  Add in a layer of management and controls, and it doesn't seem likely that many Finance activities are heading for the home office any time soon.

Cognizant buys captive service unit to expand BPO capabilities

An article at Business-Standard.com discusses a recent purchase by Indian BPO company Cognizant.  Cognizant recently purchased the India-based captive service unit of UBS.  As part of the deal, Cognizant and UBS entered into a 5-year service agreement to support UBS' back-office processes.  Estimated revenue over the 5-year period is $442 million USD.

From Cognizant's perspective, this purchase expands their BPO capabilities while providing a guaranteed revenue stream.  According to the the article, "The acquisition will deepen Cognizant’s financial services’ domain knowledge and enhance its capabilities to provide integrated services across consulting and technology."

From UBS' perspective, the deal frees UBS from managing processes that they believe can be better managed by a 3rd party.  According to the article, "For UBS, the sale of the India Service Centre marks the next stage in the development of the UBS offshoring and outsourcing strategy. In recent years, the availability and maturity of third-party outsourced services has grown significantly. UBS has therefore decided to adopt a buy rather than a build strategy for its outsourcing needs, said the company in a statement. This will take advantage of the scale and expertise of third parties to improve efficiency, while reducing costs and increasing flexibility."

An interesting note is that UBS' India Service Center provided traditional support activities such as IT, but it also provided capabilities around research and analysis, something that has traditionally been held onshore but is increasingly seen as an appropriate function to offshore or even outsource.

Here's the link to the full article:

http://www.business-standard.com/india/news/cognizant-buys-ubs-captive-unit-for-75-mn/373422/