Outsourcing Trends
Importance of Outsourcing
Business services outsourcing includes a wide variety of businesses that offer services to other businesses on an outsourced basis that can comprise of accounting, receivables collection, benefits administration, HR administration, recruiting, training, security and computer-related services.
This industry is one of the three major industries in the United States that has seen a major growth in the last decade due to recent technological developments.
As organizations have become more comfortable with the benefits of outsourcing transactional processes, they have progressively started to outsource higher value-added services and more comprehensive processes for example, they move from outsourcing just one, discrete function to outsourcing an entire end-to-end process (from accounts payable to complete finance and accounting operations, from payroll to entire HR operations).
As companies move to more comprehensive outsourcing relationships, they are able to benefit from greater economies of scale, broader transformation of their processes and an accelerated speed to value.
Many CFOs have seen BPO as a viable approach for managing discreet processes, thanks to increasing vendor Expertise, multi-language support and successful delivery with balanced SLAs for monitoring and control.
As successful outsourcing project experience spreads, they see that substantial operational efficiencies and cost savings are not only possible but realistically within reach.
When CFOs are considering BPO, we recommend that they evaluate suppliers on their ability to deliver the following four types of benefits:
1. Rapid and Sustainable Cost Reduction:
India has historically been the offshore location of choice, serving as the pricing benchmark for outsourced services. With its large, low-cost, English-speaking labor pool, India still dominates the scene, especially for organizations that value price and English fluency.
2. Strategic Flexibility:
Strategic flexibility means more than just a choice of lower cost locations. Companies streamlining their Operations with us have the flexibility to :
Rely on a highly qualified labor pool with access to some of the best trained resources in the market.
Leverage an operating model with a truly variable cost base that's easily scalable to grow with business requirements.
Manage the scope of what is outsourced and when, by addressing traditional processes first and broadening to core business processes at the desired time.
Offload and improve transaction-based, repeatable processes so Finance can expand its role to handle more strategic, value added activities that contribute to the profitability and growth of the business.
3. Compliance and Control:
Regulators are watching to ensure that standards of compliance and governance are maintained, particularly as outsourcing pushes into higher value-add areas that are more critical to business continuity and where concerns over client confidentiality and data protection loom large. One of the key issues under discussion is whether to use one or multiple centers. This issue has become more prevalent as clients require outsource higher value processes.
4. Service Quality:
The tendency to outsource the more transaction-based processes has led to a commodity mind-set. With AP and Payments Processing, for example, the focus is very much on cost reduction and maximizing productivity, a key goal for many insurers when outsourcing back-office processes. While cost is always important, BPO in financial services provides the opportunity to generate additional value.
Value can be measured financially, as in a reduction in AR days, but can also be intangible, such as improved Management Information. Both types of value can be incorporated into an arrangement with a supplier, but the more intangible the requirements, the more collaborative the approach to working between client and supplier should be. As can be seen, there are many variables to consider when thinking about outsourcing elements of the finance function. Client and supplier should work collaboratively to construct the solution and define their subsequent relationship.
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