Strategic technology investment enables both process optimization and long-term value in FAO outsourcing arrangements.

by Chris Gattenio

Q How do I determine the level of technology enablement that my company needs when outsourcing F&A processes?

A. There are a number of factors to consider when selecting both your FAO provider and solution, including technology enablement. In order to capitalize effectively on the options available, you must first understand your organization’s specific F&A requirements and goals.

Do you really know why you’re outsourcing and what your goals are? Where is your organization in terms of transformational requirements? What is your appetite for change? Ability to invest? How much risk are you willing to take on? Are you looking to commit to a solution that delivers long-term efficiencies with transformational benefits, or are you looking for quick savings in the short term? The answers to these questions will determine the amount you invest in technology to drive innovation.

Working with your executive team, realistically determine your organization’s overall F&A needs, including the cost savings required, the level of change that is acceptable within your organization, and the overall expectations that exist internally around technology investment in an FAO solution. Most importantly, understand that successful FAO arrangements are partnerships—working closely with your outsourcing provider to clearly communicate your organization’s needs allows you to jointly develop the best solution for your business. This approach will help both parties address the specific technology requirements—and options—for your business.

The strongest FAO providers generally offer extensive technology capabilities for each process within your finance organization. What you choose—and how you determine your technology approach—can have lasting impact on the value you receive over time. A culture of true technology innovation can be a critical factor in enabling a successful outsourcing arrangement in the long term.

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To begin with, it’s important to understand that there are essentially three levels of technology investment that can significantly impact your overall success as a business. Strong FAO providers offer a variety of solutions with standardized, configurable tools to best support your organization’s needs and capacity for change, and should work closely with you to determine the right mix and pace of adoption for your business. Keep in mind that more technology investment generally equates to greater long-term transformation, delivering greater value in terms of cost savings, as well as the higher-value benefits, including increased visibility, information insight, and non-operating cost value (i.e., profit leakage, customer churn, working capital, and risk mitigation).
So, what level of technology enablement and investment is your organization ready for?

Lift and Shift
Some organizations are interested in merely dipping their toes in the transformational waters, adopting an approach of rapid savings driven by labor arbitrage and minimal risk. A lift-and-shift approach requires a basic use of technology-enabled solutions and is driven solely by the goal of process improvement through delivery excellence. It includes the implementation of required technology that is essential to enable the outsourcing of your F&A processes. For example, document management and workflow are critical requirements when offshoring F&A processes to enable efficient flow of process execution. This approach costs less, but it does not seek transformational solutions such as ones that eliminate paper-based transactions.

Automation and Standardized Processes
In addition to reducing operating costs, automation and standardized process execution across your finance organization expands upon the benefits of labor arbitrage by enabling higher operating margins through increased productivity and reduced headcount.

This approach works best for organizations that are interested in technology enablement but aren’t as enthusiastic about making a net investment over the term of the contract. These businesses are looking for technology to pay for itself (an acceptable ROI), while seeking the addition of best practice designs within a controlled solution that will deliver value beyond labor arbitrage. This approach offsets the cost of technology over the term of the deal, and delivers greater strategic, transformational and financial efficiencies in the long term.

Information Innovation
Organizations that are seeking to optimize the benefits of transformation are generally willing to commit to a net technology investment in order to not only driver greater efficiencies, but also garner greater value in other ways. These businesses are driven by the ability to improve insight, visibility, and control, and are willing to invest in greater information management.

In addition to the cost savings and standardization benefits noted above, a truly innovative approach to FAO includes technology transformation that delivers information insight; i.e., improved reporting of financial information, SLAs, reconciliations, etc., for stronger compliance and/or process optimization that drives higher value beyond operating cost savings. This approach improves your organization’s value proposition by enhancing visibility into processes and systems, improving control, and reducing risk. Combined with your provider’s domain expertise, technology that drives information is a commitment that will take your organization the farthest down the path of improvement, and it will cost less than if you do it on your own.

Most importantly, a strategic approach towards technology investment enables your FAO provider to act as an “innovation partner” in your business. Working together, you can develop solutions that combine labor arbitrage, process excellence and technology-enabled best practice models that enable greater innovation, accountability and discipline that extend across your organization. Finding the right partner that also offers you the option to stage your
investment over time enables your pace and rate of change to match your commitment to technology investment. It is key that you assess the provider’s commitment to innovation and technology upfront to ensure there is well defined path.

Regardless of the type of solution that you choose, finding the right technology mix for your organization can only be achieved through a truly joint approach to F&A transformation. Clear communication with your chosen provider results in a successful, sustainable partnership in the long term. Working together within an atmosphere of true technology innovation can ultimately result in greater flexibility, sustained improvement, integrated business performance management, and increased competitive advantage for your business.