Accenture's BPO Practice: From Traditional to Transformational
Historically, outsourcing has been viewed as a mechanism to reduce costs and leverage specialist skills while allowing management to focus more time on core activities. Often companies have turned toward outsourcing when external business factors demanded more radical cost reduction ideas. This practice has led providers to offer a traditional, cost- focused model for outsourcing.
Now, a new, more sophisticated outsourcing approach called business transformation outsourcing (BTO) is evolving; it combines the benefits of both cost reduction and enterprise transformation. Forward-looking finance functions are adopting this new model of outsourcing as the way to transform themselves from a perceived overhead function to a value creator. The transformational outsourcing model is radically reshaping the role of the finance function.
Pressure on Finance to Deliver Greater Value
As CFOs present financials to institutional investors, the press, and their own executive committees, it has become clear that more and more stakeholders want and expect their finance organization to play a greater role in creating wealth. This is a development that is causing organizations around the world to rethink their mission and tactics.
First to change has been the role of finance professionals. The traditional transactional mentality has increasingly been replaced with reinvigorated emphasis on ROI. Now, finance must daily prove that its department adds value to the firm in excess of the cost of its function.
To allow an organizations finance personnel to focus on strategic issues and to reduce significantly the cost of the finance function, many are turning to finance and accounting outsourcing. Through outsourcing, companies can quickly realize cost savings of up to 50 percent on their outsourced functions by leveraging the outsourced firm's strengths in finance process transformation and its global network of multiclient service locations.
Introducing the Strategic Agenda
Other, more strategic drivers account for the increased emphasis on the role and contribution of the finance organization. Examples include the continuing pressure from investors to reduce operating costs as a way to influence returns and the emerging influence of shareholder activist groups on organizational governance and on the CFO's agenda. For this reason alone, finance organizations will need to be more value- and wealth-focused than ever before.
The globalization of business and its expanding competitive pressure has defined the requirements for higher degrees of process and information standardization. In addition, the recent scrutiny placed on any finance organizations accounting practices has created an even higher standard for financial statement transparency. Data and transactions, whatever their origin, need to be handled and interpreted in the same way if the enterprise is to be managed as a whole.
Furthermore, today's finance organization must rapidly assimilate significant changes to the business landscape, such as acquisitions/divestments and new technology, as well as changes to government regulation and legislation.
Raising the Value Ceiling
Figure 1 indicates the step-wise increases in value creation that are achievable by moving to a full outsourcing model. Many organizations have embarked on large-scale shared services or enterprise solution programs only to be disappointed by the level of benefits they have actually achieved and/or sustained. Even those who have enjoyed high levels of benefits become frustrated over time because they have hit a ceiling of achievable benefits. The measurable benefits of moving to outsourcing with a provider that specializes in transforming the finance and accounting process areas are:
- Turnkey capability with reduced investment
- Lower, predictable cost of service and best-in-class transaction costs
- Guaranteed service levels
- Freedom from the need to attract, develop, and retain non core employees
- Increased flexibility to adapt to customer demands and to integrate the results of merger and acquisition activity and other transformational change
- Focus on core business and revenue generation
- Extended ability to focus on finance business partnering
- Rigor around service level management and continuous improvement
Moving Finance From the Back Office
BTO is best defined as a program that transforms business operations through outsourcing for a rapid, sustainable, step-change improvement in enterprise-level performance.
BTO is new in offering a way to substantially increase the benefits achieved through accel-eration. It combines strategic initiatives with cost reduction to drive growth and shareholder value. Risks and gains are shared with an outsourced business partner in a collaborative partnership.
Finance and accounting transformational outsourcing can be part of a larger BTO initiative or it can be pursued within the finance organization itself. It provides an opportunity to transform finance from a back-office function with a transaction processing focus to a value-added business partner.
Freeing Funds for Investment
Transformational outsourcing uses a portion of the benefits from traditional activities to fund more strategic finance initiatives that in turn drive benefits outside of cost reduction. Typical areas of improvement include:
Performance Management
Performance management improves an organizations ability to define, communicate, drive, and measure business strategy and corresponding business performance. This allows the various levels within the organization to set goals and objectives, respond quickly and make course adjustments based on definitive indicators, hard-wire strategy to operations, and measure results using balanced and relevant metrics.
Strategic Budgeting, Planning, and Forecasting
Improved planning and forecasting capabilities help organizations respond more quickly to internal and external changes in their businesses while meeting the investment communitys need for more predictable forecasting.
Working Capital Management
Practically speaking, working capital management means improving the management of accounts receivable (AR), accounts payable (AP), and inventory. For example, many creative BTO contracts address these opportunities to reduce DSO, increase inventory turns, or improve the AP position.
In addition, they typically include less obvious, indirect impacts like the reduction in administrative rework and errors, an improved organizational alignment that balances work-ing capital, and an increased understanding of customer service concerns.
Finance Strategy for Business Partners
Increasing the proportion of finance effort spent on value added business support activities by increasing integration of finance in a business decision-making role within the rest of the business, increasing strategic analysis roles and capabilities, and broadening finance capability requirements and skills.
Why is Business Transformation Outsourcing so Different?
Five qualities make BTO markedly different from the traditional outsourcing model:
- CEO and CFO Leadership – Enterprise-level change requires enterprise-level sponsorship at the highest levels, with executives taking hands-on roles.
- Bold Strategic Agenda – Executives need to break out of their industrys strategic ruts to tap new sources of value.
- Innovative Contract Structure – The financial structure of a transformational contract must fund the necessary investment at the best possible cost of capital and motivate the business partners commitment by aligning goals, distributing risks, and promising rewards.
- Collaborative Outsourcing – In a dynamic business environment, transforming a business quickly means handing off the critical processes to a specialist company that can bring them up to a competitive level. A skilled and highly motivated business partner can drive change more aggressively than the firm itself can.
- Enterprise Outcomes – Business transfor-mation outsourcing raises the stakes. It aims squarely at outcomes that shareholders – and competitors – can see.
