In challenging times, a select gathering of corporate leaders addressed the key milestones and decisions as the market prepares for new growth.
 
By Peggy Cope
 
In the early 1990s, Kodak starting taking small bites from cost, year over year, said Neil Ginn, CFG global accounting shared services, Kodak, Ltd.  But in the mid-90s, the photography supply behemoth realized it had to do something quite different for its finance structure in the EAMER region.
 
Nearly every attendee at the 2009 FAO Summit in London came with a similar agenda, and all were eager to hear how their peers at other corporations had achieved what everyone wanted.
 
The objectives for Kodak were straightforward: Simplify and streamline. And even more, reduce cost. In 1997, the company started with its operations in Switzerland and Belgium, looking at general ledger, fixed assets, and accounts payable. Initially, shared services seemed to be the way to go, but by March 2005, Kodak was beginning to see a steep incline in the digital photo business, and needed to do something quickly to take the costs out. Outsourcing was the answer.
 
Kodak chose IBM’s F&A BPO solution, covering general ledger, travel and expenses, accounts payable, fixed assets, accounting, credit collections and reporting. The results have been good: Service level agreement are being met consistently, the transition of work to IBM is ongoing, processes have been standardized, controls have been improved, and most importantly, the corporation achieved 30 percent savings in its costs.
 
However, with revenues sharply down so far this year, the job is not done. Additional steps include a renewed drive to cut costs, more outsourcing (including more high-level R2R work), and moving more accounts receivable customers to the shared services center.
 
“When we started, we moved small stuff that didn’t matter much,” said Ginn. “Now, credit managers have to justify why something isn’t with IBM already.”
 
Welcome to the new face of F&A sourcing, folks, and the theme of many conferences these days. Rachael Stormonth, senior vice president of research at Nelson Hall, continued the theme with her informal panel discussion of “The Road to Transition, Not Perdition.”
 
“Nelson Hall did a survey of 500 organizations globally, although it was U.S.-centric, at the turn of the year, when the recession became a snarling beast staring people in the face,” Stormonth said. The results found everyone scrambling to reduce costs, at 88 percent. Offshoring was a popular mantra among those considering outsourcing and shared services, emphasizing a new focus on new, even lower cost geographies.
 
Alistair Niederer, head of business, Europe, for  Sutherland Global Services, commented on the need for speed that is so urgent these days. “You have to make decisions, even though some will be wrong, but some will be right. The skill of a business is to move, adapt. There’s a problem with procrastination. Things are going down very fast. But do people have the ability to move fast?” he asked.
 
 
Sourcing 2.0
A panel on next-generation approaches to sourcing featured Thierry Iovane (director, Europe and Latin America, CIMA), Andrew Tinney (CFO, Deutsche Bank), Neil Ginn (CFG global accounting shared services, Kodak, Ltd.), and Maurice Marciano (Director, XE group resources and shared services, Xerox Europe), with Roy Barden (senior director, The Hackett Group) moderating.
 
Barden noted that The Hackett Group is seeing increased movement toward outsourcing, but as part of a mixed environment with blended delivery.
 
“Everything that has a repeatable outcome is offshored,” said Tinney, while onshore facilities are “better equipped for multiple relationships.” Deutsche Bank is “going whole hog, as we commoditize processes we will offshore more.”
 
Ginn acknowledged that Kodak is looking to outsource more. To people in his company who worry that they won’t be able to pick up the phone and shout at someone when something goes wrong, he counters, “Well, why can’t you shout at someone at IBM?”
Marciano added that “for internal pushback, the best answer is to show how it will work. Often, outsourced is better than in-house or a captive shared services center.”
 
Iovane raised the concern of career development for those in outsourced locations. “How do you motivate those in bottom level jobs?” he asked. The answer is not as simple as paying more. “It’s not only about money, but also about training.”
 
Sandy Khanna, a partner at IBM MPBPS Europe, commented that some external service provider staff members have crossed the border to join the staffs of the companies for which they provide services, “because that’s where the career track is.”
 
To some extent, buyer companies think this is fine. Said Tinney, “We expect people to take ownership of the processes they handle. They must understand it.”
 
Nelson Hall’s Stormonth raised the possibility of whether the recession could result in sourcing “marriages made in haste,” that might lead to later repentance.
Tinney replied, “Is desperation making them make mistakes, and are providers predatory when their business is down?” Time will tell on both counts.
 
“There’s a huge drive around cost now,” said Barden. “Innovation is where people see a lack. What does innovation mean?”
 
Marciano noted that his organization had chosen to work with IBM “because of its ability to be ahead of the game in three columns: Cost, flexibility, and innovation.”
 
Tinney noted that Deutsche Bank had occasionally sought innovation that it didn’t get. “There was some resistance to it,” he said.
 
Iovane theorized that innovation would come during years of exchange, as a deeper relationship was built.
 
The buyers on the panel expressed a wish list for their providers’ improvement: 
1. To get better at doing things they don’t necessarily want to do.
2. To standardize operations across different centers of excellence and eliminate competition within shared services; and
3. To continue to improve the level of service, creating benchmarks against the services they provide for other clients.