Former CFO, FAO metrics guru, and FAO provider Chris Gattenio of IBM has been an advisor for more than 1,000 CFOs. This month, she answers the question “What have you done for me lately?”

by Chris Gattenio

Q. How are leading-edge companies ensuring that their outsourcing value contract remains sustainable once the initial cost savings are delivered?

A: For the past decade, organizations have been facing rising cost pressures due to volatile market conditions. The initial drive for cost savings through labor arbitrage was answered largely by the rapid growth of the F&A outsourcing industry, delivering substantial initial savings and efficiency through contracted service level agreements.

Five years later, as these contracts continue to evolve, it’s becoming apparent to many outsourcing buyers that while savings were indeed dramatic, solutions that continuously deliver integrated process improvements and strategic benefits are proving to be more sustainable long-term.

While the first generation of outsourcing focused almost exclusively on cost and quality, and the second on individual sub-process improvements, the third generation of FAO marks a strong push toward long-term, sustainable value through integrated, value-driven solutions.

The pressure is on for providers to deliver additional value beyond the obvious cost reductions of labor arbitrage. A strong outsourcing provider will deliver improved business results through integrated transformation of your business processes, applications, and infrastructure with a scalable, repeatable outsourcing model.

“Organizations today must look further than the obvious benefits of FAO, namely labor arbitrage and multi-process bundling, to truly optimize their accounting processes within a sourcing environment,” said Phil Fersht, vice president of Everest Research Institute. “Smart finance leaders are now focusing on optimizing the quality and velocity of their dollar flow-cycle by engaging F&A providers who can deploy technology solutions that underpin, orchestrate, and knit together their accounting processes on a global basis.”

When choosing an outsourcing partner, keep in mind that the strongest providers will speak to the following checklist:

• Business expansion capabilities—to  ramp up resources and capabilities for a particular business function that are required to support business expansion that results from strong growth.

• Integration and centralization capabilities—to integrate, centralize, and streamline existing processes, resources, and systems along specific business functions. This eliminates redundancies and drives standardization in the management of the underlying business function.

• Global business process management capabilities—to drive standards and consistency in the management of a business  process across the global organization and  gain external help to manage the complexity associated with managing business processes across geographies.

• Process improvement capabilities—to achieve industry-standard best practices around business processes from both an operational cost and service-level quality perspective.

• Regulatory compliance capabilities—to ensure that business processes are being managed in compliance with changing government regulations.

• Technology access and optimization capabilities—to achieve cost-effective access to enable effective implementation of
platform-agnostic technology.

• Improved competitive positioning capabilities—to improve customer intelligence, increase customer retention rates, lower employee turnover, improve employee satisfaction and productivity, improve procurement leverage, establish support for new channels to market, improve time to market, as well as access new revenue streams.

WHAT TO EXPECT?
Leading-edge outsourcing agreements focus on the need to mitigate complexity, drive profitable growth, and balance risk and performance through technology enablement, the integration and transformation of both people and processes, and offer both onshore and offshore global delivery capabilities to suit individual client needs.

This combination of capabilities reflects a provider’s culture of value creation for their clients, enabling flexibility, rapid access to best-practice solutions, and a sustainable model of strategic, transformational, and financial improvement.

Regardless of the varying benefits possible in a value-driven outsourcing solution, the most important factor to consider is sustainability. World-class companies know not to be short-sighted in choosing a long-term partner, as lasting outsourcing relationships are driven by long-term value delivered beyond just cost.