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Accenture

In order to create a mutually beneficial relationship, resources from your company and the service provider will need to jointly shape an outsourcing contract. Focused attention is required from both parties’ management teams to ensure that the objectives defined at the onset are embedded in the final agreement.

Driving Value Creation

Leading organizations worldwide have discovered the benefits of Accenture Finance Solutions, both by outsourcing their finance and accounting services to Accenture and by drawing upon the experience and expertise in implementing and managing finance transformation to deliver significant service and cost improvements. Consider these examples:

• With Accenture’s help, a large aerospace and defense company reduced its month-end close from 18 days to seven days and reduced the time required to produce consolidated group reports from 10 days to two days.
• Accenture collected $90 million in incremental cash from outstanding customer debtors in just four months on behalf of a major communications company.
• By leveraging Accenture’s best practices in cash forecasting, a global oil and gas company was able to manage its cash position in the overnight markets much more efficiently and improve its annual interest charge by approximately $750,000.
• On behalf of a logistics company, the days sales outstanding (DSO) was reduced by 10 percent over a four-year continuous improvement program. Over the last 12 months, each month- end result has been better than the same period the previous year.
• Accenture’s contract compliance team has recovered $25.5 million on behalf of clients –  equivalent to one percent of audited expenditures – including $16.5 million for one client.

Cost savings are considerable as well. Six North Sea oil and gas companies (BP, Talisman Energy U.K., Conoco U.K. Limited, LASMO, TotalFinaElf Exploration U.K. PLC, and Britannia Operator) have achieved savings of 30 to 50 percent on finance and accounting costs. Equally important, by leveraging Accenture’s leading-edge technology, they have greatly enhanced their financial systems and services, positioning themselves for growth even as the industry matures.

The bottom line, however, is not just about cost savings. Partnering with Accenture delivers rapid, breakthrough results that drive earnings growth and bolster the bottom line. Outsourcing, for example, can significantly improve operational effectiveness, service levels, customer responsiveness, and business value and performance. It’s the strategic approach to achieving dramatically improved performance, sustainable competitive advantage, and higher shareholder value.

Approach – From Start to Finish

Based on more than 11 years of experience in finance and accounting business process outsourcing, Accenture has developed a proven evaluation and transition approach that has been leveraged on hundreds of opportunities. As depicted in figure 1, our straightforward approach is broken into oversight, execution, and transition activities. The following sections highlight activities associated with each of these phases.

1.  Operations Assessment – Where Are We Today?

Mobilizing the appropriate resources is critical in making the outsourcing relationship a success. The joint client and outsourcer team will need the appropriate skills, processes, and tools to perform the work. In this phase, the team reviews the client’s current environment as it relates to headcount, costs, and operational processes. This step will provide a foundation, which will then be used to assess where value resides. The operations assessment will see the review or development of:

• Existing organizational models, including a headcount by process analysis.
• Current business processes and the documenting of high-level opportunities for change.
• Current cost structures, including salaries, benefits, and other direct nonpayroll costs.
• Enablement projects that are planned to be executed – determine costs, resource requirements, timing, and expected savings.
• Process-based performance metrics and transaction volumes.
• The existing service management capability, including the service level agreements (SLAs), operating level agreements, the service reporting process, and demand management capability.
• Internal control environment, including internal and external auditors’ memorandums.
• Current technical infrastructure, including applications and hardware.
• Commitments and long-term obligations to see how these can be transferred to the outsourcer.
• The human resources environment, including the employee profile (i.e., seniority, benefits program, locations, pension plans, etc.).

The final output from this review is an agreed-to baseline for the potential term of the contract.  This is developed by taking agreed-to growth projections and extrapolating current figures into future operating costs, headcount requirements, and systems requirements. Sharing a mutual agreement of the performance baseline is paramount to building a solid relationship.

2.  Solution Design and Business Case – Where Do We Want to Be Tomorrow?

Once the current environment is reviewed, both parties jointly define what the future state will look like. This is done based on the value that can be generated from the various in-scope areas and the services that will be delivered. Additionally, the business case is developed and it will provide a basis for both organizations’ decision-making. Based on the delivery track record with our existing clients, Accenture has found that outsourcing portions of the finance function can yield cost reduction of 20 to 50 percent. It probably goes without saying, but the current cost structure and openness to exploiting the value levers drives the ultimate business case outcome. The following primary value levers are considered when developing the future operating model and associated cost structure:

• Process Improvement – The degree of process rationalization directly correlates to business benefits achieved. One critical element to understand is the organization’s ability to absorb change to business processes. These often include change in underlying policies and practices that drive process behavior.
• Technology Enablement – Many of the process improvements that are identified will require changes to supporting applications.  In addition, much of the transformational element of outsourcing is centered around application and technology platform standardization. The magnitude of this technology rationalization will drive the cost and duration of many transition activities.
• Low-Cost Wage Alternatives – Using economically attractive locations can result in significant cost advantages. As processes are considered for relocation, a number of implications will be evaluated. Examples include language requirements, intermediate and end-customer proximity, and transaction risk management.
• Service Management – Aggressively managing service levels to highlight incremental costs associated with on-going change tends to limit operating costs.  Accenture has a proven track record of managing BPO business arrangements exclusively through SLAs. By using a common framework for evaluation we have delivered significant results to our clients.

Once the value levers are assessed and the associated savings are identified, the team needs to define how the services will be delivered through a service delivery model (SDM). One of the critical components in defining the SDM is how the outsourcing resources will interact with the external stakeholders.

Based on the required level of interaction, the activities are split in two main categories: front office where interactions are required and back office where interactions are not required. By splitting the SDM activities this way, the outsourcer is able to determine where the activities need to take place and who needs to perform these activities. This will help the outsourcer confirm the level of savings that the client will be able to achieve in its operating cost structure.

Once the future state of the value levers is defined, the enablement initiatives are estimated and the SDM is designed, the contract team is able to finalize the business case, which will serve as the foundation for the decision-making process for both the client and the outsourcer.

3.  Due Diligence and Contracting –  How Can We Get to Where We Want to Be?

Throughout the contract evaluation phase, both parties typically perform due diligence on each other. Activities associated with due diligence are designed to confirm the comfort level that each organization has with the other. For example, many of Accenture’s clients visit our processing sites to see a center in action. In addition, they typically want to conduct reference discussions with our current outsourcing clients to evaluate their level of satisfaction.

Alternatively, Accenture tends to conduct interviews with senior executives and managers to determine the fit for outsourcing and confirm the opportunities and challenges with the transition. At the end of the day, both parties have to be grounded in the same facts to feel comfortable structuring a long-term contractual arrangement. As the parties move into the contracting phase, which will define the business terms of the relationship and ultimately produce the contractual agreement, a number of critical activities are performed. The pure contracting element of an outsource shaping exercise should be driven by the following objectives:

• Create a long-term business partnership.
• Put in place a flexible and scalable agreement to support the client’s business environment.
• Create an agreement that encourages both parties to drive down cost and increase service levels.

4.   Transition Planning and Execution – How Do We Achieve Effective Startup?

The transition of work and employees to the outsourcer needs to be well planned and will require focused effort from both parties. There are a number of elements required to successfully deploy outsourcing. They include:

• Plan and Execute Communication – In most cases employees may be transferred from the company to the outsourcer or redeployed within another internal department. A well-defined communication strategy needs to be defined early on in the process in order to mitigate any associated risk.
• Transfer People – When the outsourcing provider takes on the company’s employees, there will be employee transition activities, such as payroll and benefits transfer, relocation, etc. Any redundancy issues must be addressed.
• Implement Service Management – The service management infrastructure is designed and rolled out as part of the transition activities. Accenture brings a proven governance approach to deliver a structured yet adaptable service with tight service level agreements to ensure exacting performance improvement.

Once the contract is signed and the work and employees have been transitioned, the organization is then ready to press the start button and the service provider begins operations in the new environment. Note that throughout the BPO contracting exercise, both parties need to operate an oversight and approval process to continuously assess progress and provide approval to move forward.

Figure 2 provides an illustration of what activities the outsourcer will execute and where these activities are typically performed (i.e., front office or back office).

The rigorous, clear methodology for contract-shaping outlined is an example of Accenture’s expertise in the business transformation outsourcing arena. The combination of our operations experience, consulting expertise, industry knowledge, and global reach enables us to deliver new capabilities and high-performance operations to effect radical change of our clients’ businesses at the enterprise level.

Getting Started – How Long Will it Take?

Most clients can evaluate their potential business case in three to five weeks.

Accenture has a vast amount of experience developing finance and accounting operations outsourcing solutions and associated business cases. We have evaluated numerous organizations and will apply our experiences from over 11 years of providing finance and accounting outsourcing to world-class organizations.

The operations assessment and business case phases can typically be delivered in a rapid timeframe. However, as you might expect, this varies based upon the scope of services being considered, the scale of existing operations, and the pace at which you want to move. A team of dedicated resources from Accenture Finance Solutions is prepared to work collaboratively with your people so you can evaluate a potential business case in three to five weeks.